The Ferns will now hope to win their final group game against Cameroon, but even three points in Montpelier is unlikely to be enough to secure a passage to the round of sixteen.
And on the evidence of this display, a victory over the African side would be far from guaranteed.
For the Ferns, this was a step backwards from their promising display against the Netherlands.
They were too passive for most of the match – gifting the initiative and possession to the Canadians – and eventually the pressure told.
Canada's dominance was finally rewarded in the 47th minute, as Jessie Fleming guided home a pinpoint Nishelle Prince cutback.
The Ferns had looked to push on early in the second half – after taking passive approach for much of the first 45 minutes – but were caught out by Prince's pace and clever run.
Prince doubled their lead with 10 minutes to play, putting the seal on a one sided contest.
For much of the match it was tough viewing from a New Zealand perspective.
Canada have superior players, and are ranked World No 5 compared to the 19th ranked Ferns, but World Cups are about rising to the occasion and playing the game of your life.
Too many of the Ferns individually couldn't do that.
The Canadians completely dominated possession throughout the match.
At one point in the first half they were enjoying more of the ball, statistically, than the United States did during their 13-0 hammering of Thailand last week.
The halftime statistics made sobering reading; Canada had thrived on 73 per cent possession, with almost three times as many passes as their opponents.
The Ferns struggled to get any momentum, and almost every second pass went astray.
Forwards Sarah Gregorius and Rosie White struggled to link up together at all, and Gregorius, while she worked hard, showed an inability to hold the ball up.
Canada's tactical switch early in the first half proved difficult to deal with.
Central midfielder Sophie Schmidt dropped deeper while both fullbacks pushed on.
It meant that Canada employed three at the back, allowing them to overload both flanks, which the Ferns struggled to deal with.
New Zealand's best opportunity fell to Olivia Chance in the 39th minute, but the midfielder couldn't control a right foot volley, as it skewed across the face of goal after a clearance from a Betsy Hassett cross.
When they did get the ball, they were quickly isolated by Canada's press. The Ferns rarely managed more than three or four passes in sequence, which meant the ball was constantly coming back.
Canadian striker Christine Sinclair, playing in her fifth World Cup, hit the crossbar from a corner during a melee in the penalty area in the 17th minute.
Ferns fullback CJ Bott had left the field moments before, with suspected broken bones in her hand, after a driven Canadian cross bent her fingers back, which saw Ria Pervical move into defence and Annalie Longo enter the fray.
After defending stoutly, the way the Ferns conceded just after halftime was poor.
A simple lofted ball down the left flank put Prince in space, who outpaced Rebekah Stott, drew in Abby Erceg, then found Fleming who finished with aplomb in the far corner.
Canada should have extended their lead just a minute later, as the Ferns were again cut open but Sinclair stabbed her left foot effort over the crossbar from 12 yards
A superb save from Erin Nayler denied Prince midway through the second half, as the Ferns keeper leapt to her left to palm away a header that looked destined for the far corner.
But a second Canadian goal always looked likely, and Prince prodded home in the 79th minute, after the luckless Sinclair had hit the woodwork for the second time.
Canada 2
New Zealand 0
Halftime: 0-0
