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A couple of Hispanic guys unfurled an American flag early Monday outside an Irish pub in downtown Chicago and led a cheer: “U-S-A! U-S-A! U-S-A!”

Hundreds of other fans cheered with them, and a passing street sweeper honked a salute. The United States soccer team had just defeated Mexico 2-0 in the World Cup in Jeonju, South Korea, and even though it was 3:30 a.m. in Chicago, the upset was an eye-opener.

“I never thought I was going to see this in my lifetime,” said Joe Pakovits, 35, an investment specialist from Chicago, who was still going strong despite his sleep deprivation.

By winning, the U.S. advanced to a quarterfinal match Friday against perennial power Germany and assured itself of its best World Cup finish since the first one in 1930. And the team broke the hearts of Mexico’s supporters, hundreds of thousands of whom call Chicago home.

“This was a funeral,” said Joseph Rivas, a physician who joined about 600 other fans of the Mexican team at La Kermes restaurant in Little Village to cheer an expected victory.

Fans in Mexico City were even more emotional.

“It hurts us here,” said Jose Luis Luviano, 21, punching his chest. Tears flowing down his face smeared the red, white and green Mexican flags painted on his cheeks.

“The MOST BITTER defeat,” wailed El Universal, a Mexican newspaper.

The game’s significance went beyond statistics and standings. For U.S. fans, it was a chance to show that their team belongs among the world’s elite, while for Mexico, it was a chance to meet its larger neighbor in an arena where Mexico traditionally has held the upper hand.

“Mexicans are the underdogs of life,” said Abel Vences, a personality on Chicago Spanish-language radio station WOJO-FM. “In soccer, it’s the U.S. that is the underdog.”

As U.S. goalkeeper Brad Friedel made another spectacular save, Ramon Lopez, 19, shook his head in disbelief. He had come to La Kermes expecting to celebrate a victory for Mexico, and a chance to hold his head high.

But now, he said, he wished he were back home in Nayarit, Mexico.

“I’d rather endure this in Mexico,” he said. “If Mexico had won . . . it would have been a triumph against something so mighty.

“Mexico invests almost everything in soccer, and the U.S. does not. That’s why we should have won.”

Both in Chicago and in Mexico, fans were stunned by the defeat, though they could not agree whether it was due more to the U.S. team’s improvement or Mexico’s poor form.

“Excuse me, but the United States team is terrible,” said Roberto Salcedo, a student at a Mexico City high school. “It is so much more humiliating to lose to the United States, where soccer has no real meaning.”

Yet contrary to popular belief, U.S. soccer fans do exist. While most of their countrymen slept, they flocked to bars and restaurants to watch a game that didn’t begin until 1:30 a.m. Chicago time.

More than 500 fans, many wearing the jerseys of the U.S. team or the Chicago Fire, packed both floors and the staircase at Fado Irish Bar in downtown Chicago almost two hours before the match began.

The most fervent supporters arrived at 10 p.m., hoping to snag seats closest to the biggest screens.

As the bar erupted in cheers after each goal, some fans grabbed cell phones to call friends watching at home. But it was too loud to do more than yell “U.S.A.” into the receivers.

For Gabriel Guzman, born in the United States to Mexican parents, supporting the U.S. team put him at odds with his entire family and almost all of his friends.

But “I want USA soccer to grow,” said Guzman, 32. “You have to appreciate what we have in this country.”

His friend, Victor Lagos, is of Ecuadorian descent, but he rooted for the U.S. as well. His sister, he said, called him a sellout for supporting the U.S. against a Latin American team.

When the final whistle tooted, Guzman stood on a barstool and yelled, “Let’s go in the street!” to Lagos. They grabbed a huge U.S. flag and ran outside to the corner of Clark and Grand.

Fans of every race joined them, putting their arms around one another’s shoulders and bouncing to the traditional soccer chant: “Ole, ole, ole, ole.”

Taxi drivers and even a city of Chicago street sweeper honked at the celebration.

The victory was especially sweet, fans said, because players with Chicago ties figured prominently. Arlington Heights native Brian McBride scored the first goal, set up by Chicago Fire star Josh Wolff.

Longtime fans also hope the team’s surprising run will boost more interest in professional soccer in the U.S.

“I’m totally, newly converted,” said a gleeful Paul Schmitt, 26, of Chicago. “I just wish I didn’t have to work at 7 a.m.”

About a dozen Mexican soccer fans who watched the game at Fado suffered nothing worse than good-natured heckling.

Adolfo Dorenbaum, a Mexico City resident on a business trip to Chicago, wore a bright-green Mexico jersey. Even though he whistled loudly when the U.S. players appeared on the screen, “I’ve been treated very well,” Dorenbaum said. “Sportsmanship lives.”

In defeat, Jerry Sada, 29, of Chicago, offered U.S. fans swigs from a silver flask.

“Either way, we would have won,” said Sada, a car salesman born to immigrant parents. “I was pulling for Mexico, but the better team won.”

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Find the latest World Cup coverage at chicagotribune.com.