Ward Racing's Lorenzo Travisanutto won the OK-class race of the second WSK Super Masters round at Sarno, emerging victorious after a last-lap mistake from Tom Joyner.
The Italian kicked off the race third behind Nielsen and Pedro Hiltbrand, the latter having taken a shock pre-final win from 12th.
However, Travisanutto quickly claimed the lead and spent the first half of the race holding off Nielsen before eventually losing out to the Dane.
He was overtaken by the late charger Joyner as well, who then also passed Nielsen.
The 2013 World Champion looked set to make it to the finish in the lead only to suffer a spin and retire on the last lap.
Closely following the Brit, Nielsen was forced to avoid Joyner's spinning kart and ran wide as a result, losing three places.
As such, it was Travisanutto inheriting the victory, ahead of Nielsen's rookie teammate Clement Novalak and Hiltbrand.
The Spaniard entered the round as the championship leader and, benefitting from closest rival Nielsen's bad luck, he continues to hold the position by 24 points.
Nielsen, who will make his car racing debut later this year in Audi TT Cup, settled for fourth in the race, while Birel ART's Martijn van Leeuwen completed the top five.
OK class top 10:
|1||Lorenzo Travisanutto||Ward Racing|
|2||Clement Novalak||Tony Kart Racing Team||+0.118s|
|4||Nicklas Nielsen||Tony Kart Racing Team||+0.785s|
|5||Martijn van Leeuwen||Birel ART Racing||+1.218s|
|6||Jean-Baptiste Simmenauer||Tony Kart Racing Team||+2.043s|
|8||Noah Milell||Kosmic Racing Team||+4.699s|
|9||Logan Sargeant||Ricky Flynn Motorsport||+5.634s|
|10||Davide Lombardo||RB Racing||+8.765s|
Shvetsov becomes OKJ winner, Blomqvist and Watt collide for the lead
SMP protege Ivan Shvetsov clinched the victory in an eventful race for the junior category, joining fellow Russian Bogdan Fetisov and Ulysse de Pauw on the podium.
The 13-year-old sealed his win in a similar fashion to Travisanutto, taking advantage of those ahead of him hitting trouble while he was running third.
His teammate Isaac Blomqvist was a dominant performer throughout the weekend, having won three of his four heats as well as his pre-final.
He was into the lead off the line and a great defensive drive saw him stay in first for the majority of the race despite being under pressure from several racers at all times.
Watt emerged as his main rival during the closing stages and the Dane ended up crashing into Blomqvist three laps before the finish.
Now into the lead, Shvetsov had to keep Fetisov and Dmitrii Bogdanov at bay for the rest of the race.
RFM driver Bogdanov was one of the biggest movers, having forced his way up to third from 22nd on the grid.
He even stole second from Fetisov temporarily but then lost ground and dropped back to settle for fifth at the finish.
Bulantsev, also supported by SMP, took the flag in third to briefly complete an all-Russian podium but received a penalty for hitting David Vidales during the race.
The latter started from the front row but lost several places, only to fight back and finish fourth behind de Pauw.
At the halfway stage, Shvetsov leads the championship by three points over Vidales, with Sami Taoufik, who retired in the pre-final and thus missed the final, holding third.
OKJ class top 10:
|1||Ivan Shvetsov||Ward Racing|
|2||Bogdan Fetisov||Team Komarov||+0.111s|
|3||Ulysse de Pauw||Birel ART Racing||+3.068s|
|4||David Vidales||Energy Corse||+3.282s|
|5||Dmitrii Bogdanov||Ricky Flynn Motorsport||+3.555s|
|6||Caio Collet||Birel ART Racing||+3.627s|
|7||Oscar Piastri||Ricky Flynn Motorsport||+4.357s|
|8||Ilya Morozov||Ward Racing||+4.673s|
|9||Charles Milesi||Tony Kart Racing Team||+4.818s|
|10||Guido Moggia||Tony Kart Racing Team||+5.113s|
Ardigo fights back to top KZ2 race
Marco Ardigo recovered from a poor start to win the shifter class, which consisted of KZ and KZ2 karts.
The 32-year-old Italian lost three positions after the start, switching places with Jeremy Iglesias, who jumped into the lead from fourth.
However, the Frenchman could only keep first for three laps before giving up the spot to Bas Lammers, who was then overtaken by the charging Ardigo a lap later.
The reigning WSK Super Masters champion slowly but surely pulled away from the rest of the field, winning by three seconds.
Round one winner Anthony Abbasse secured second followed by Paolo De Conto and Iglesias, the trio gaining a spot after Bas Lammers hit trouble in the closing stages.
His woes allowed fellow Dutchman Jorrit Pex to finish fifth.
Giacomo Pollini led the KZ2 field in 13th overall.
KZ/KZ2 class top 10:
|1||Marco Ardigo||Tony Kart Racing Team|
|3||Paolo De Conto||CRG||+3.241s|
|5||Jorrit Pex||CRG Holland||+4.951s|
|6||Rick Dreezen||Ricciardo Kart Racing||+5.362s|
|7||Jonathan Thonon||Praga Racing Team||+6.332s|
|9||Patrik Hajek||Kosmic Racing Team||+7.394s|
|10||Jorge Pescador||Praga Racing Team||+8.224s|
Gabriele Mini dominates 60 Mini class
Privateer Gabriele Mini took a lights-to-flag win in the lowest category, leading WSK Champions Cup triumphant Michael Paparo to the chequered flag
A storming start from Mini saw him establish a lead of a second in just one lap, a gap he managed throughout the race.
Him and Paparo were in a class of their own, beating the field by five seconds.
CRG's Leonardo Bizzotto, Baby Race driver Pietro Delli Guanti and Francesco Pizzi, winner of the first round, completed an all-Italian top five.
60 Mini class top 10:
|2||Michael Paparo||Formula K Junior Team||+1.113s|
|4||Pietro Delli Guanti||Baby Race||+6.863s|
|5||Francesco Pizzi||Giugliano Kart||+7.011s|
|6||Riccardo Camplese||Gamoto SNC||+7.094s|
|8||Roman Stanek||Giugliano Kart||+9.905s|
|9||Vladislav Lomko||Energy Corse||+12.380s|
|10||Alexandru Iancu||Real Racing||+12.802s|