It was disappointment for Petecio, who had been looking to earn the Philippines' first Olympic gold in the country's proud boxing history.
Judges' scorecards -- which are now displayed after each round to make Olympic boxing more transparent -- unanimously had the 20-year-old Irie ahead after round one.
Both boxers were letting their fists go in a lively and open contest at Kokugikan Arena, which is usually used for Japan's national sport, sumo.
The 29-year-old Petecio, the 2019 world champion, had the better of the second round.
The third was also highly competitive, but it was Irie who got the nod from the judges, putting her hand over her mouth and crying.
The Philippines are still in contention for another gold, with Carlo Paalam facing another Japanese fighter, Ryomei Tanaka, in the men's flyweight semi-finals on Thursday.
Paalam, who is now guaranteed at least bronze, defeated Shakhobidin Zoirov of Uzbekistan in his quarter-final Tuesday.