The Japanese club needed just a point at home to stay on top of the group but failed and went down 2-0 to the Steelers.
Kawasaki manager Takashi Sekizuka was very disappointed after realising what now lies ahead of his team.
"This is such a pity," he said. "Now we have to play Gamba Osaka away to stay in the tournament and that's a pity too.
"We knew Pohang would attack fast and hard in the first 20 minutes, and we wanted to get over that period.
"But we gave away two free-kicks in a similar way and at a similar place. That was a turning point of this game.
"We put on attacking players from the start of the second half in order to get back into the game and we created some chances in the first 10-15 minutes but we couldn't finish them and gave away an additional goal from a mistake.
"Our players played hard, and this is not the end for us. We'll fix our problems in the domestic competition to prepare for the next game."