Debutant Ben Nelson came in for the injured Callum Hulme following successive defeats for City, who lined up in a 3-5-2 shape for the clash in north Leicestershire.
The Foxes had an early opportunity to open the scoring when Rams defender Harrison Solomon was penalised for a handball in the area with the award of a penalty to the visitors.
However, Callum Wright’s low spot-kick, aimed towards the bottom left corner, was saved superbly by home goalkeeper Brad Foster to deny the City midfielder from 12 yards.
The visitors didn’t have to wait too long, though, and they were ahead on 13 minutes, as Shane Flynn’s corner was bundled into the net at the far post by Darragh O’Connor.
On the half-hour mark, though, Derby were level. Archie Brown's smart delivery was perfect for Jack Stretton and the Rams' No.9 nodded it beyond Jakub Stolarczyk in the City net.
The Rams had a succession of opportunities after the restart, too, as Jordon Brown hit the wall from a promising free-kick, before Isaac Hutchinson's effort whistled wide of the near post.
It got tougher for Leicester midway through the second period as Shane Flynn was dismissed for a second bookable offence following a clash with Connor Dickson.
Derby made the extra man count in the latter moments as Brown was felled in the area by O'Connor, allowing Stretton to step up and confidently convert his second of the night.
The numerical advantage was evident in the latter moments, particularly as the home side advanced, but City's Under-23s should be commended for the way they stood up to the challenge.
With Dempsey Arlott-John and Will Russ on from the bench, Leicester retained a threat from set-pieces and on the counter, and they continued to battle until the very last whistle.
Midfielder Tyrese Shade looks to work an opening for Leicester's youngsters.
A late penalty for the Rams ultimately cost Leicester dearly at Loughborough University Stadium, especially considering it came so soon after Shane Flynn's red card.
Jack Stretton made no mistake from the spot, sending a powerful drive past Jakub Stolarczyk, and Derby were able to hold onto their advantage late on.
An essential interception from Mitch Clark stops Derby from countering.
Speaking live on LCFC TV, former Fox Sean St Ledger said: "Mitch Clark has had to play a number of positions tonight, he's gone in at centre midfield and left-back too. He worked really hard and tried to drive the team on."
Where does it leave us?
City Under-23s skipper Sam Hughes puts himself in the thick of the action.
The Foxes sit ninth in Premier League 2 Division 1 with three points from four games - won during the opening day victory over Manchester United last month.
Rams goalkeeper Brad Foster just about does enough to stop the Foxes from finding the net.
The Foxes next travel to Keepmoat Stadium to face Harrogate Town in the EFL Trophy on Tuesday evening (7:45pm BST kick-off) following a 2-1 win earlier in the season at Hull City.
City: Stolarczyk; O’Connor (Russ 84'), Hughes (c), Nelson (Arlott-John 69'); Daley-Campbell, Clark, Wright, Leshabela, Flynn; Reghba, Shade
Subs not used: Bosworth, Suengchitthawon, Pennant.
Goal: O’Connor 45’
Photo credit: DCFC
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