Two close-range efforts from the impressive Virgil Gomis for Forest, either side of an exquisite goal from Foxes midfielder Khanya Leshabela, maintained the visitors' 100 per cent record.
Leicester's youngsters have three points from two games, following a 3-0 victory over Norwich City in October, Forest have six, and the Canaries and Exeter City both have one apiece.
City’s line up include four changes from last Wednesday’s penalties success at Rochdale in the Checkatrade Trophy, with goalkeeper Max Bramley, Callum Elder, Hamza Choudhury and Fousseni Diabaté returning to action at Under-23s level in Whetstone.
While the Foxes were brightest in the opening five minutes, the dangerous Gomis broke for Forest and forced Josh Knight to clear the ball off his own line.
A few minutes later, meanwhile, Gomis caused more problems for Leicester’s backline, breaking into space and prompting Bramley into a smart low save at his near post.
Leshabela's effort just before the half-time break was a lovely example of skill and composure.
Midway through the first half, City broke and when Ryan Loft’s effort trickled through to the far post, Callum Wright couldn’t quite get enough contact on his effort to open the scoring.
Gomis, though, punished the hosts in after after the half-hour-mark, finishing tidily into the bottom corner from the centre of the penalty area.
The Foxes were steadily improving, though, and earned a deserved equaliser in the 41st minute as Leshabela, with the outside of his boot, found the top corner from the edge of the area.
They very nearly went in at the break ahead, too, as Kiernan Dewsbury-Hall’s curler came back off the crossbar, and they emerged from the dressing room with the same intensity.
Bramley, who can play for both City and Telford as per the terms of his youth loan contract, had less to do in the early stages of the second half.
In fact, most of the action occurred at the opposite end with Leicester posing a threat down the flanks. On the hour-mark, Darnell Johnson was unfortunate to send a header over the bar.
Bramley comes out to deny Gomis a goalscoring opportunity for Forest.
Just after the hour-mark, meanwhile, Sam Hughes and Admiral Muskwe, who have suffered from back and quad injuries respectively, made long-awaited returns from the bench.
Choudhury and Lamine Kaba Sherif were the players to make way. However, the match was to take a frustrating turn for the hosts in the latter stages.
Gomis, a constant threat for Leicester, was in space to apply a neat finish – following excellent wing-play from Jayden Richardson – to regain Forest’s lead in the 77th minute.
While the home side pressed for another equaliser - with Hughes heading over right at the end - Forest held on to secure three points.
City’s youngsters now have an 11-day break until their next fixture, a Premier League 2 clash with Manchester City at Holmes Park on Friday 23 November (7pm GMT kick-off).
City: Bramley, Johnson, Knight, Kaba Sherif (Hughes 62), Elder, Choudhury (c) (Muskwe 62), Dewsbury-Hall, Leshabela, Wright (Tee 76), Diabate, Loft
Subs not used: Davies, Ughelumba
Goal: Leshabela 41
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