Instead of Thompson earning her second ANA Inspiration title in four years, it was Ryu who won her second major title, her fourth LPGA title but her first LPGA win in three years.
Steve Stricker, who shot a 65 for the lowest round on Sunday, and Bernhard Langer were tied for third, one shot behind the leaders.
What's astonishing about Thompson's penalty is she committed the violation the previous day and LPGA officials only learned about Thompson's violation because a television viewer brought it to their attention, according to The Associated Press.
"I didn't even check the leaderboard, but I knew Lexi was playing well", Ryu said.
She steeled herself in superb fashion, though, and, after fighting back with an immediate birdie at the 13th, had an eagle putt on the last hole to claim what would have been an incredible win.
Officials were notified via email by a television viewer that during the third round on Saturday the American had marked her ball on the 17th green but failed to place it back in the same spot.
The 22-year-old gathered herself and had an eagle putt to win on the final hole, but settled for birdie to force a playoff against Ryu So-yeon, with both locked at 14-under 274.
"I've realized the more I get comfortable with this golf course, the environment and the surroundings, the better", he said.More news: IRS to use private debt collectors amid huge telephone scam
"Every day is a learning process", Thompson told ESPN after her loss.
"I sort of a feel a little bit like what Phil (Mickelson) goes through when he goes to the U.S. Open", McIlroy said last month, referring to Mickelson being a six-time runner-up in the only major Lefty hasn't won.
"To penalise her the two strokes and then two for signing an incorrect scorecard. you talk about following the letter of the law and they did, but did they do it in the spirit of the game? I'm ready to go". I thought Lexi played really, really well.
When she was informed of what she had done by an official, she responded by saying "Is this a joke?" Thompson birdied the par-4, 387-yard 15th hole to retake the lead before giving it back a hole later with a bogey.
Fans and fellow pros were unhappy with the LPGA's decision and let them know on Twitter.
There probably isn't someone that dominates the headlines past their peak in a sport quite like Tiger Woods.
"Viewers at home should not be officials wearing stripes", he wrote. "Going into the tournament, I had no expectations about winning, at all". She failed to overtake the world No 1 position from Lydia Ko this week as a win in the year's first Major would propel her to the top ranking.
For all his power and athleticism, Johnson had never been in contention at Augusta National until past year. His ball had moved slightly while he lined up a putt on the fifth green, the USGA eventually hit him with a one-shot penalty after his round.