Lee Connelly and Elliot Embleton struck in the first half at the Stadium of Light on Tuesday as the Black Cats leapfrogged the Foxes into top spot in Group B by a margin of three points.
City must now wait on results from three matches to be played later this week to discover if they will join Sunderland in the last-eight as one of two best-placed runners-up.
Following a 4-2 reverse at Oldham Athletic in the Checkatrade Trophy, Steve Beaglehole made five changes with Daniel Iversen, Darnell Johnson, Josh Eppiah, Layton Ndukwu and Josh Gordon included.
The Black Cats, meanwhile, were beaten finalists in this competition last season and the North East club have shepherded several young stars into Chris Coleman’s senior side this year.
Home boss Elliott Dickman was handed an advantage, too, by the inclusion of Ivory Coast international centre-back Lamine Koné, making his return from a long-term knee injury.
A tense opening paid witness to few opportunities as both sides got a feel for their surroundings in a match which carried considerable ramifications. Gordon was unfortunate to misfire from 30 yards.
Meanwhile, his attacking counterpart for Sunderland, Connelly, attempted to pull off the same feat, but Iversen saved well.
On 17 minutes, Ndukwu’s corner landed perfectly onto the head of George Thomas. His glanced effort, though, was held assuredly by Max Stryjek in the hosts’ net.
Gordon was a handful for Joshua Robson on the left flank, twisting and turning his way into space. The former Stafford Rangers man did just that to evade his marker on the half-hour.
However, his pass into Thomas, in the middle, was collected by the onrushing Stryjek. Nonetheless, it was another example of the inventive football played by Beaglehole’s side this season.
Despite looking comfortable in possession and threatening in attack, the Foxes fell behind in the 36th minute when an awkward bounce landed in the right place for Connelly.
The Sunderland man took it down well, turned inside Sam Hughes at the back and slotted it into Iversen’s bottom corner to put the hosts into a commanding position.
As City went in hunt of an equaliser, their predicament worsened as Embleton, positioned outside the area, picked his spot to double the hosts’ advantage.
After the break, Beaglehole’s side emerged intent on delivering an improved performance. With 20 minutes remaining, a trialist very nearly got a goal back, but was denied by the post.
In the dying moments, substitute Liandro Martis attempted a more direct route, galloping through the middle. His low effort, though, was saved well by Stryjek in the game's final flashpoint.
Major moment
Sunderland’s second, just before the interval, handed City with an unenviable mountain to climb against an effective defensive rear-guard action.
Elliott Embleton’s finish proved to be as decisive as it was impressive, ultimately putting the match beyond the Foxes in the North East.
Where do we stand?
Leicester must wait to discover if they qualify as one of two best-placed runners-up while Sunderland progress to the Quarter-Finals of the competition as Group B winners.
Matches this week - Newcastle United vs. PSV, Tottenham Hotspur vs. Benfica and FC Bayern vs. FC Porto - will ultimately determine their fate. City have four points and a goal difference of +1.
Coming up…
Attention turns to the visit of Manchester City to Holmes Park in Premier League 2 on Monday (7pm kick-off) – which you can watch live on LCFC TV.
Then, a tough PL2 trip to tackle Chelsea in Aldershot awaits the Foxes on Friday 2 February, although Steve Beaglehole’s side will be buoyed by their earlier 2-0 success over the Blues.
The details...
Sunderland: Stryjek, Robson, Hume (c), Gamble, Taylor, Koné (Storey 60), Diamond, Embleton, Connelly, Kimpioka (Kokolo 86), Hackett (Allan 67)
Subs not used: Woud, Young, Greenwood, Brotherton
Goals: Connelly 36, Embleton 43
City: Iversen, Johnson, Wood, Dewsbury-Hall, Knight, Hughes, Thomas (Trialist 64), Choudhury (c), Eppiah, Ndukwu, Gordon (Martis 80)
Subs not used: Ughelumba, Bramley, Watts, Debayo
Referee: K Evans