The young Foxes had previously been unbeaten since the start of 2020, a run which included an excellent 4-1 success over Reading at Belvoir Drive a fortnight ago.
However, their west London hosts raced into a three-goal lead after 46 minutes on Saturday, through a brace from Jean-Pierre Tiehi and a solitary strike from Fabio Carvalho.
City's youngsters battled back, though, as Kasey McAteer latched onto Bailey Aisthorpe's pass to get one back for the visitors in the 51st minute at Fulham's training ground.
They got a second goal, too, through Dempsey Arlott-John before the hour-mark, but Leicester's Under-18s were unable to get another to maintain their unbeaten run in 2020.
The result leaves City sixth in the U18 Premier League South, four points behind Tottenham Hotspur, before hosting Brighton & Hove Albion on Saturday 1 February (11am kick-off).
The details...
City: Bosworth (c); Barrett, Aisthorpe, Sams, Leathers; Tavares, Ewing, McAteer; Flynn, Arlott-John, Russ (Maswanhise 76')
Subs not used: Odunze, Springer, Yfeko, Marcal-Madivadua
Goals: McAteer 51', Arlott-John 57'
All times GMT.