At Old Trafford, Warwicks needed a victory to get runners up in the County Championship Division One table.
However, Warwicks won the toss but were soon 48-6 with Botha,Westwood, Trott, Bell, Ambrose, Clarke all out cheaply.
Neil Carter made 59 from 43 balls, hitting seven fours and three sixes and Jim Troughton made 48 but with only Westwood the other player to make it into double figures, Warwicks were all out for 148.
When Lancashire batted, Chris Woakes got Horton out early. Smith made 23 before he was caught by Westwood off the bowling of Rankine and Loye followed a run later when he waa run out by Carter.
Lancashire were now 45-3 but Laxman (53 not out) and Chilton put on 65 for the fourth wicket.
At stumps, Lancs were 126-4.