It's Town's third defeat on the bounce.
Athlone Town remain without a win since May in the League of Ireland First Division.
They were beaten 6-1 by league leaders Dundalk at the weekend and are now 15 games without a win.
Jason Foralin Oyenuga gave Town an eight minute lead, however goals from Gbemi Arubi, Eoin Kenny, Rohan Vaughan and Keith Ward sealed an emphatic win for Dundalk.
Town remain on 17 points and eight points from ninth place Kerry FC.
Their next match is away to Finn Harps on August 22nd.
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