In just a fourth league loss of the campaign, Joe Rankin-Costello gave the hosts the lead after 19 minutes before Calvin Ughelumba was sent off for the Foxes.
Rovers took control with goals from Ben Paton and Stefan Mols before half-time being added to by Jack Vale’s brace, a John Buckley effort and Charley Doyle's late header.
Following last week's 3-1 success over Feyenoord, Louis Ramsay and Luke Thomas came in for Darnell Johnson and Josh Knight, who headed out on loan on Deadline Day.
There was also a runout for midfielder Matty James, replacing Tyrese Shade, who also starred in that Premier League International Cup success.
The first opening of the game came after just three minutes as Ryan Loft broke free of his man and ran at goal, but his low drive fizzed just wide of the near post.
Leicester were behind on 19 minutes. In an impressive breakaway, Daniel Butterworth played it across from the left and found Rankin-Costello, who beat Viktor Johansson.
The situation quickly escalated before half-time after Ughelumba was dismissed for clipping the heels of Vale just as the Rovers forward appeared to be through in on Leicester's goal.
From the following free-kick, on the edge of City’s 18-yard box, Paton riffled an unstoppable effort into the bottom corner before a close-range effort from Mols made it 3-0 at the break.
Despite a double change seeing Shade and Lukáš Hušek join the action, it didn’t get any better for the Foxes in the second half.
A quick-fire double from Vale, both close-range efforts, made it 5-0 to Blackburn before Dewsbury-Hall got one back for the visitors with a tidy effort from distance on the hour-mark.
Hope of further improvement on the scoreline faded, though, when Mols located Buckley behind City's backline in the 74th minute before slotting it past Johansson.
It was then seven with six minutes to go as Paton crossed for right-back Doyle and he nodded it into the net in the final act of a night to forget for the Club's youngsters.
Calvin Ughelumba's dismissal, when the score was only 1-0, undoubtedly had a huge influence over proceedings at Leyland County Ground.
The Foxes struggled to adapt to life with just 10 men while their hosts took full advantage with an expressive attacking display.
Where does it leave us?
The Foxes, who started the night with hopes of climbing to the Premier League 2 summit, remain in third place in Division 1 with 27 points from 16 games.
On Friday night, City’s youngsters contest their fifth Premier League Cup group stage fixture at Group D leaders Nottingham Forest (7pm GMT kick-off).
City: Johansson, Ramsay (Hušek 45’), L. Thomas, Kaba Sherif (c) (Elewa-Ikpakwu 59’), Ughelumba, Pascanu, Dewsbury-Hall, James, Loft (Shade 45’), Muskwe, Wright
Subs not used: Bramley, Tee
Goal: Dewsbury-Hall 60’
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