Lewis Fiorini scored a second-half brace for the hosts, including a penalty, after Keke Simmonds’ earlier strike had given Gareth Taylor’s side a first-half lead at Academy Stadium.
While ultimately frustrated in Manchester, the young Foxes still have fixtures against Blackburn Rovers and West Ham United to ensure their safe passage from Group E into the knockout phase.
Trevor Peake's City take on Blackburn at Belvoir Drive on Saturday 10 November before also welcoming West Ham to Leicester's training facility on Saturday 8 December.
In U18 Premier League South, meanwhile, the Academy side can improve upon their current seventh-placed position when they travel to Bodymoor Heath Training Ground to face Aston Villa on Saturday (11am BST kick-off).
Leicester City: Bosworth, Barret, L. Thomas, Elewa-Ikpakwu, Kranthrove, Husek, Pennent, Loughlan (Fitzhugh 75), Myring (Russ 60), Tavares (L. James 85) Flynn
Subs not used: K. Evans, Marcal-Madivadua