Palmeiras slump against Chilean champs
Caracas FC also produced an upset with a 2-0 win over Guadalajara in Tuesday night's other game to top Group Six.
Argentine striker Lucas Barrios put Colo Colo ahead after 43 minutes in Sao Paulo and set up a second goal scored by Colombian playmaker Macnelly Torres 10 minutes into the second half.
In between, Colo Colo had midfielder Rodrigo Melenez sent off for a second bookable offence.
Keirrison pulled one back for the Brazilians in the 71st minute but substitute Sebastian Gonzalez restored Colo Colo's two-goal lead eight minutes later.
"The Libertadores is different," said former Real Madrid and Brazil coach Luxemburgo, who has won the Brazilian championship five times but never South America's top club competition.
"We have to learn how to play the competition. There's no point in falling over all the time because the referee won't give the free kick. We played badly and deserved to lose."
Colo Colo, the only Chilean side to have won the competition, have three points from two games, level with holders LDU (Ecuador) and Sport Recife (Brazil) who have each played one game.
Caracas FC pulled off their second home win in a week when the beat Guadalajara's all-Mexican side who had scored 11 goals in their last two games.
Defender Jaime Bustamante scored from a rebound in first-half injury time, six minutes after coming off the bench, and striker Dario Figueroa added the second goal five minutes into the second half.
Figueroa sidestepped his marker and fired into the roof of the net from close range.
The Venezuelans lead their group with six points followed by Guadalajara on four, also after three games. Everton (Chile) have three points and Lanus (Argentina) one with both teams having played two games.