It was a tough night for City's youngsters with the damage being done by three first half goals for the Iron with the impressive Kevin van Veen claiming a brace and skipper Matthew Lund also on target as we struggled to find our rhythm and fluidity.
City sought to respond after the break, taking the game to Scunthorpe and spurning several chances before skipper Tommy Doyle narrowed the deficit with a 70th minute penalty.
But we were unable to make further inroads on what was a frustrating return to the Sands Venue Stadium for EDS manager Paul Harsley who played more than 120 games for Scunthorpe during his playing career.
While City sought to play our fast-paced possession-based game, the Irons employed a high physical press and utilised their pace and power behind our defence to great effect.
Livewire striker van Veen served notice of his threat inside three minutes when he dispossessed Harwood-Bellis in the box only for the young defender to avert the danger with a smart covering tackle.
However, van Veen was to make no mistake on nine minutes as he fired the hosts ahead with a stunning effort.
Receiving Junior Brown’s throw in, the striker turned on the left edge of the City box before instantly unleashing a 25-yard dipping effort which flew over Daniel Grimshaw into the top corner of the net.
There was a further early blow for City with an injury forcing Keke Simmonds off on 11 minutes with Nabil Touaizi replacing the striker.
City sought to summon up a quick response with Jayden Braaf blazing two 20-yard curling shots over the bar.
But Grimshaw then had to be alert to safely gather another dipping effort from the dangerous van Veen.
The Iron striker then barrelled a shot wide before doubling both his and Scunthorpe’s tally on 28 minutes.
Grimshaw raced out of his box to deny John McAtee but from the rebound van Keen found the target from just outside the box to strengthen the Iron’s grip on proceedings.
And a tough task got even harder just past the half hour when, from a misplaced City pass, Scunthorpe skipper Matthew Lund raced through before drilling a smart finish past Grimshaw.
City desperately needed a quick response after the break and Braaf wriggled through the box before stinging Iron keeper Rory Watson’s palms.
Grimshaw though then needed to be at his best to first deflect Abo Eisa’s close range shot and then gather McAtee’s rasping drive.
But though we put the hosts under severe pressure our frustrating night was encapsulated in a five minute spell which saw Braaf shoot inches wide after a wonderful dribble, Touaizi have a five yard shot blocked on the line and Adrian Bernabe send a half volley just over the bar.
Braaf was then a whisker away once more before City finally got the goal our pressure merited.
Substitute Felix Nmecha, making his first appearance of the season after recovering from injury, was brought down in the box and skipper Tommy Doyle made no mistake from the spot.
Harwood-Bellis then saw a snap shot fizz just wide as we sought to mount a dramatic late finale but it was all to no avail.
How we lined up
Harsley made three changes from the side which secured a dramatic win on penalties away at Shrewsbury in round two.
Daniel Grimshaw was in goal, shielded by a back four of Alpha Diounkou, Rowan McDonald, Taylor Harwood-Bellis and Nathanael Ogbeta. Iker Pozo was the midfield shield with skipper Tommy Doyle also in the engine room alongside Adrian Bernabe.
Meanwhile, Jayden Braaf, Ben Knight and Keke Simmonds provided the threat up-front.
The EDS return to Premier League 2 action on Saturday when we travel to London to tackle Chelsea. Kick-off is slated for 12noon.