Having limped into the tournament after a play-off victory over the Republic of Ireland, Les Bleus have struggled for inspiration in South Africa.
An opening goalless draw against Uruguay was shrugged off but there was no hiding the problems against Mexico who were good value for their 2-0 win in Polokwane.
"It was a moment of failure of a whole group because us we did not know how to present an answer at the moment when it was needed," said Toulalan who will be suspended for the final group game against South Africa after collecting his second booking.
A draw between Group A leaders Uruguay and Mexico on Tuesday will be enough to send France home early. "Mathematically there remains still a possibility [France can qualify]," Toulalan added. "Even if all is not finished everyone knows from now on a miracle would be necessary for us to progress."
Captain Patrice Evra agreed with the Lyon midfielder's assessment, adding: "There's no doubt we lacked concentration. The whole team is at fault for this defeat - all 13 players who played."
Bixente Lizarazu, a FIFA World Cup winner on home soil in 1998, said "the French team was well off course with their heads in a bucket".
Zinedine Zidane reserved his criticism for Domenech, whose six-year reign will end with France's elimination as he is to be replaced by former Bordeaux coach Laurent Blanc.
The former Real Madrid midfielder said the coach had blundered by dropping Yoann Gourcuff, denying the side creativity. "France did not play well, but they were against a very good team," Zidane said. "Mexico were superior to France especially physically.
"I am disappointed because France did not have a single shot on goal and that should be the least to be expected."
Mexico, however, are on the verge of progressing to the knockout stage for sixth successive occasion, although they have not got past the second round since 1986.
New Manchester United striker Javier Hernandez, who scored the opening goal last night, said the win had proved a valuable point to the players.
"Aside from the victory, which I believe is of great importance, we know we have the ability to play against quality opponents," said the 22-year-old, who will officially complete his £7million move from Chivas next month.
"I had the fortune of scoring but it was the work the group put in. Here one player does not score but rather the whole team scores."
Arsenal forward Carlos Vela is a doubt for the final group game against Uruguay after limping off with what appeared to be a hamstring problem, while midfielder Efrain Juarez is suspended.