England's hopes of reaching the T20 World Cup semifinals suffered a massive blow on Wednesday after the former champions suffered a shock loss to Ireland when rain forced an early finish to their match at the Melbourne Cricket Ground.

Chasing 158 for victory, England were 105 for five midway through the 15th over when rain halted play, with Moeen Ali 24 not out and Liam Livingstone on one.

With rain also having delayed the start, the match was unable to resume after about 15 minutes of interruption, leaving Ireland with the unlikely victory.

"Myself getting out first over didn't help, we never managed to get initiative," said captain Jos Buttler, who was caught behind for a two-ball duck.

"Ireland were excellent, they outplayed us. We made a mistake here and has made it difficult in a tough group."

Slow out of the blocks, England left themselves vulnerable to the weather and lost via the Duckworth-Lewis method, the mathematical formula used to calculate a victory target when bad weather interrupts play.

Irish fans celebrate their team's win. Photo: AFP/William West
Irish fans celebrate their team's win. Photo: AFP/William West
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Ireland, who have already beaten the West Indies at the tournament, produced a disciplined bowling performance to restrict England's big hitters.

England's task only gets more difficult as they face champions Australia at the MCG on Friday.

In only the second T20 match played between the sides - the first having been washed out at the 2010 World Cup in the West Indies - England's chase began disastrously.

After Buttler's dismissal, Josh Little had the out-of-form Alex Hales caught for seven with a miscued pull.

With Ben Stokes bowled for six by Fionn Hand, England were reduced to 29/3  before the end of the powerplay.

It could have been even worse had Dawid Malan not been dropped on 23 by Gareth Delany, the Irishman's second drop after grassing Hales early on.

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Three balls later, though, Delany made amends by catching a slogging Harry Brook for 18 off George Dockrell.

Malan then fell for 35 with a miscued pull caught at deep third man off the bowling of Barry McCarthy.

With England in trouble and well behind the run rate, Moeen began throwing the bat around.

He hammered a six and three fours to give England a fighting chance as clouds gathered over the stadium but it was all for nothing.

Ireland captain Andy Balbirnie was named Man of the Match, having led from the front with a top score of 62 off 47 balls.

"It's amazing, kind of emotional," said Balbirnie.

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"To come here (and win) against the tournament favourites is amazing.

"A few of the fans in the crowd have extended their stay."