The Foxes are consigned to the Europa Conference League play-offs, having been made to pay for more woeful defending in their Group C decider.
A draw in the other fixture between Legia Warsaw and Spartak Moscow would've kept Leicester in the competition - and there was hope when Legia were given a chance to equalise from the spot in the eighth minute of injury time.
But former Tottenham player Tomas Pekhar saw his penalty dramatically saved by Aleksandr Selikhov, compounding a terrible night for the Foxes.
Needing a point to guarantee staying in the competition, Brendan Rodgers' side were two down within 24 minutes, with goals gifted to Adam Ounas and Elif Elmas.
The Premier League side did stage a valiant comeback, drawing level within nine minutes thanks to strikes from Jonny Evans and Kiernan Dewsbury-Hall.
However, having failed to keep a clean sheet for the 20th consecutive match, Leicester would yet again come undone at the back.
Elmas struck again at the start of the second-half, and describing the action on talkSPORT 2, Tottenham legend Clive Allen was deeply unimpressed.
He said: "That really was poor defending from Leicester City, there were opportunities to stop the cross. There were opportunities to block the shot.
"Collectively, they were all over the place."
While their problems were undoubtedly at the back, James Maddison and Jamie Vardy were both guilty of missing guilt-edged chances which would've sent Leicester through.
With Rodgers' men currently languishing in the bottom half of the Premier League table, their season really is going from bad to worse.