A Jahmal Hector-Ingram penalty and an injury time effort by Morgan Whittaker proved the difference.
And a disappointing afternoon was compounded by a red card for skipper Taylor Harwood-Bellis.
City started brightly on the back of our fine UEFA Youth League win at Shakhtar Donetsk in midweek and Jayden Braaf almost gave us the perfect start.
After a slick move up the left flank, the Dutchman fired in a fine effort, but Derby keeper Matthew Yates got down low to save the effort.
In a tightly contested first half, the hosts then came close themselves to breaking the deadlock just before the half hour
Josh Shonibare’s effort was blocked by keeper Gavin Bazunu but looked to be rolling over the line before being hooked clear.
However, City’s task suddenly got a whole lot harder eight minutes after the restart after skipper Taylor Harwood-Bellis was shown the red card for a second bookable offence.
And Derby then took full advantage after City infringed in our penalty area as Jahmal Hector-Ingram converted from the spot.
With a numerical advantage Derby upped the pressure and it needed a smart save by Bazunu to deny Max Bird a second goal for the hosts on 74 minutes.
And a disappointing afternoon was sealed in injury time when Morgan Whittaker doubled the hosts’ advantage to seal victory.
How we lined up
Gavin Bazunu was in goal shielded by a back four of Alpha Dionkou, Yeboah Amankwah, Taylor Harwood-Bellis, Tyreke Wilson. Iker Pozo was the midfield anchor with Fisayo Dele-Bashiru while Adrian Bernabe and Jayden Braaf provided the width on either wing. Ben Knight and Nabil Touaizi carried the threat up-front.
What it means
The result sees City remain in 10th place in the table on four points.
Our Under-21s return to Leasing.com Trophy action on Tuesday evening when we travel to take on Bradford City at Valley Parade, looking to build on our opening group victory away at Rochdale. Kick-off in Yorkshire is at 7.30pm.