Raith led 2-0 before Stranraer stormed back with Joao Vitoria heading the winner in injury-time.
Raith had got off to a flier with Dave McKay heading them in front after just four minutes when he beat Max Currie to a Jamie Barjonas’ corner and Barjonas scored the second goal ten minutes from the break with a neat finish.
However, Kyle Turner pulled a goal back three minutes from the break when he slid in at the back post to beat Dean Lyness.
Innes Cameron equalised two minutes later with a superb header from Mark Lamont’s corner.
Raith piled on the pressure in the closing stages. Max Currie did well to save from Ross Matthews with 16 minutes left and then Euan Murray shot wide. But Vitoria stunned the home fans with his late winner.
Montrose edged ahead of East Fife in the play-off race with a 2-0 win at New Bayview after a double from Paul Watson.
Montrose took the lead after 68 minutes when Watson headed home Iain Campbell’s free-kick. Watson made sure of the points when he scored his second in injury-time.
Forfar Athletic and Dumbarton had to settle for a 0-0 draw. Calum Gallagher was not far away for Dumbarton with a shot from outside the box and John Baird saw a decent shot well saved by Grant Adam at the other end.