The hosts were forced to field a young, makeshift side because the fixture clashed with the opening round of the South African Premiership and clubs refused to release stars.
However, after losing only 3-2 away in the first leg of a second round tie last weekend, South Africa were expected to secure an overall victory and book a date with Zimbabwe.
Instead, Lesotho held South Africa until half-time, then Jane Thaba Ntso scored twice and Hlompho Kalake once to give the visitors a 6-2 aggregate triumph.
The embarrassing loss completed a chaotic week for South African football with England-born national coach Stuart Baxter quitting two days ago.
“I feel that I cannot continue to work with the required professionalism and passion,” was the parting shot of a 65-year-old who achieved only eight wins in 21 matches.
National under-17 coach Molefi Ntseki has been named caretaker coach while locals Pitso Mosimane, Gavin Hunt and Benni McCarthy have been tipped as possible full-time replacements.
Before Baxter left, former star Mlungisi ‘Professor’ Ngubane slammed national football body president Danny Jordaan, accusing him of treating the national team “as if it were his club”.
Kenya were another second round casualty after losing 4-1 on penalties in Nairobi following a second 0-0 draw with east African neighbours Tanzania in successive weekends.
– Slashed ticket prices –
Erasto Nyoni, Paulo Nyanganya, Gadiel Michael and Salim Hamis converted spot-kicks for the visitors while only Clifton Miheso was on target for the home side.
The match attracted a 30,000 crowd to the Kasarani Stadium after Kenyan officials slashed ticket prices up to 80 percent to 100 shillings ($0.96/0.86 euros).
Kenya are among the most high profile countries of the 24 who have never qualified for a Nations Championship tournament.
Togo ended an 11-year wait for a first CHAN qualifying win when they edged Benin 1-0 in Lome through a Marouf Tchakei goal on 70 minutes.
It was the lone goal of the two-leg tie and earned Togo a crack at 2018 runners-up Nigeria in the final qualifying round during September and October.
In another close encounter, Madagascar needed away goals to squeeze past Mozambique after losing 3-2 in Maputo.
Trailing 1-0 from the first leg, the Mozambicans raced to a three-goal half-time lead through a Luis Miquissone brace and one goal from Dayo Antonio.
But Madagascar netted twice early in the second half via Arnaud Randrianantenaina and Lalaina Nomenjanahary to book a showdown with Namibia.
Prince Dube emulated Ugandan Patrick Kaddu by scoring a second leg hat-trick, which gave Zimbabwe a 3-1 win over Mauritius in Bulawayo and a 7-1 overall success.
The Nations Championship is restricted to footballers playing in their country of birth.
Previous editions have been won by the Democratic Republic of Congo (twice), Tunisia, Libya and Morocco.