Mostafa Mohamed gave Egypt an early lead in the second minute with a well-placed shot from outside the area.
This goal scored after just 99 seconds, is the fastest goal in the tournament so far and the second-fastest in the competition's history.
However, Egypt failed to impress throughout the match, allowing Mozambique to pose threats, particularly from the flanks.
In the second half, Witness Ouembo equalized for Mozambique with a well-executed header in the 55th minute.
Just three minutes later, Clesio Bauque capitalized on a defensive lapse and doubled Mozambique's lead.
Egypt attempted to intensify their offense, introducing several attacking-minded players, but they struggled to make a significant impact.
Their only real threat came in the 77th minute when Hamdi Fathi's shot hit the post.
With the game heading towards an unprecedented loss for Egypt against Mozambique, Mostafa Mohamed was fouled in the area and was awarded a penalty after a VAR check.
Mohamed Salah stepped up and converted the penalty, rescuing Egypt from defeat in their opening game.
Next, Egypt will face Ghana on Thursday, while Mozambique will take on Cape Verde earlier in the day.
The unconvincing performance by the Pharaohs raises doubts about their chances of winning their much-awaited eighth African title.
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