After going behind, Senegal dominated for the remainder of the match but was unable to find an equalizing goal.
Midway through the second half, it looked as though Senegal had been handed a lifeline after referee Alioum Alioum awarded a penalty for handball.
However, after being advised by the Video Assistant Referee (VAR) to review the incident on the pitch side monitor, Alioum overturned his original decision.
It was yet more heartbreak for Senegal, which is still yet to win the greatest prize in African football.
But it will be the manner of this defeat that will hurt the most. Algeria's goal came from its one and only shot of the game and few would argue that Senegal was the better side for the other 88 minutes of the match.
Less than two minutes in -- 79 seconds to be exact -- you got the sense this was just going to be Algeria's night, after the Fennec Foxes took the lead in bizarrely fortuitous circumstances.
Bounedjah silkily spun his defender and latched onto Riyad Mahrez's through ball, cutting inside onto his right foot and firing at goal from range.
Senegal center-back Salif Sané got across to make a block and appeared to have done enough, but the ball looped high into the Cairo night -- almost comically high -- and somehow kissed the underside of the crossbar and nestled into net.
Midfielder Badou Ndiaye extended his arms in the direction of his goalkeeper Alfred Gomis, inquiring as to why he made no attempt to get back and prevent the goal.
Presumably, like thousands of others in the stadium, he thought the ball must have been going behind for a corner.
Once in a generation
It was the perfect start for the Algeria fans who had traveled to Egypt in their thousands for this once-in-a-generation chance at making history.
Not since 1990 had the Fennec Foxes made it to the AFCON final, beating Nigeria 1-0 on home soil in front of 105,000 fans.
The Algerian government had reportedly subsidized more than 5,000 plane tickets for Algeria supporters to make the four-hour flight to the Egyptian capital.
However, hundreds of fans with legitimate tickets -- including local Egyptians as well as Algerians -- were reportedly refused entry and left to wander the perimeter of the stadium, trying to find a way in after being told by officials that some sections were already full.
After Algeria's bright start -- Bounedjah almost made it 2-0 just moments later -- Senegal grew into the final and was by a considerable distance the better team for the remainder of the half.
But despite their dominance, the Lions of Teranga were unable to produce any clear-cut chances, largely due to Algeria's consistent tactical fouls that prevented Senegal finding any sort of rhythm.
The closest they came to opening the scoring was M'Baye Niang's sharp turn and long-range volley that whistled inches over Rais M'Bolhi's crossbar.
Led by Liverpool star Sadio Mané, Senegal was not willing to simply let this opportunity pass it by. Having never previously won the Africa Cup of Nations and only once making it to the final, these players knew they were on the brink of immortality.
This final had been billed as Mané vs. Mahrez but so far the Premier League duo had been upstaged by their less illustrious