The balance between task demand and one's competence is critical for the maintenance of intrinsic motivation. According to Flow theory and Self-determination theory, optimal challenge gives rise to the maximum intrinsic motivation, and an inverted U-shaped curvilinear relationship between perceived challenge and one's intrinsic motivation is suggested. In order to provide direct experimental evidences for predictions of these theories, in this study, we employed the two-player StopWatch game that we previously designed, which made references to the game format of a badminton tournament. According to our manipulation, a male participant was defeated by the same-sex player paired with him (played by a well-trained confederate of the experimenter) in two matches, one with a wide margin (the complete defeat condition) and another with a narrow one (the near miss condition). Participants performed better and reported to enjoy the near miss match to a greater extent. Besides, an enlarged Stimulus-preceding negativity was elicited when participants were actively anticipating outcomes in the near miss condition, suggesting greater anticipatory attention toward the outcome and an enhanced intrinsic motivation to win. Thus, converging electrophysiological evidences from this study and our former study confirmed the inverted U-shaped curvilinear relationship between perceived challenge and one's intrinsic motivation.