After a 4-2 success over Norwich City last time out, the young Foxes headed to Motspur Park hoping to make two wins in a row - an ambition aided by Mirsad Ali's 10th-minute opener.
Delano McCoy-Splatt, though, hit back from the penalty spot for the Cottagers, before an effort from Terrell Works just before the hour made it 2-1 to the home side.
City's youngsters remain 11th in the league with 10 points from 11 games, one above Aston Villa, who have played two games more.
West Bromwich Albion at home is next up on Saturday (11am GMT kick-off).
The details...
City: Weeks; Lindsay (Cook 71'), McAlinney, Joseph (B. Amartey 63'), Grist (c) (T. Thomas 71'); Nyoni, Lewis, Richards, Ononaye, Ali; Evans (King 60').
Subs not used: Addai.
Goal: Ali 10'.