Four goals in nine second-half minutes - from Trop Parrott (2), Dilan Kumar Markanday and Harvey White - consigned the young Foxes to a first defeat since late September.
Following Friday's clash with West Ham United (12pm GMT kick-off), City's Under-18s will host Fulham in the FA Youth Cup Third Round at King Power Stadium on Tuesday 11 December (7pm GMT kick-off).
The young Foxes, who exited last year's competition at the fourth round stage, currently sit fifth in the U18 Premier League South Division standings after 10 matches.
Fulham, meanwhile, are just one place behind the Club's Academy side and fell to a 3-1 defeat by City's youngsters in the league earlier this season.
At Belvoir Drive, the hosts took the lead through a Luke Thomas strike in the 23rd minute before, in the second half, Harrison Myring and Dempsey Arlott-John added their names to the scoresheet.
Ticket details for the third round tie, set to be played at King Power Stadium, will be confirmed on LCFC.com in due course.
City: Bosworth, Elewa-Ikpakwu (Bollard 70), Kranthove, Arrey-Mbi, Flynn, Gyamfi, L. Thomas (c), Tavares, Loughlin, Pennant, Russ.
Subs not used: Stolarczyk, Myring, Arlott-John, Fitzhugh.
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