Watford looked set for automatic promotion when they impressively triumphed here a fortnight ago but, after this defeat, even a belated elevation via Wembley now seems a distant dream.
Gianfranco Zola's team of loan stars should not be counted out but the Championship's top scorers misfired, left to rue numerous missed chances when David Nugent headed Leicester's winner to end a 16-match personal goal drought.
A testy battle ended with Leicester's fans chanting about Wembley, five days after only a stoppage-time winner at Nottingham Forest salvaged them sixth spot.
Redemption now beckons for Nigel Pearson, whose position was precarious when a late-season run of two wins from 16 endangered Leicester's promotion hopes, although he insisted the tie remains evenly poised.
“Tonight's game was what you would expect; tight. I think we dealt with the occasion very well and it's nice to go into the second game with a narrow advantage,” said Pearson.
Having said that we still want to win [at Vicarage Road on Sunday]. Our approach was always to try and win both games.“
Leicester stormed Watford's backline in the match's early throes, the visitors' shaky start doing little to banish memories of the agonising way they conceded automatic promotion to Hull last week.
Makeshift left-back Jeffrey Schlupp's tantalising cross evading everyone on the edge of the six-yard box, before Nugent should have broken the deadlock far earlier than he did so, side-footing hopelessly wide when unmarked in the box.
The best opportunities of a slower-paced second half mostly went Watford's way, but 20-goal Matej Vydra spurned two of them before Alexandre Geijo nodded over at the back post.
Zola put the blank from his much-vaunted forwards down to the vagaries of the Championship and was bullish in insisting his side were hard done by in defeat.
”I honestly could not see Leicester scoring. I don't think anyone watching would have said we deserved to lose.“
Watford's profligacy was severely punished when Nugent atoned for his earlier miss by planting a towering header in the far corner.
Pearson lauded Nugent's work rate afterwards but his late goal will matter most if Leicester cap a return to form made just in time with promotion to the Premier League.
Leicester City (4-4-2): Schmeichel; De Laet, Morgan, Keane, Schlupp; King, Dyer, James, Knockaert (Drinkwater, 90); Wood (Kane, 63), Nugent. Substitutes not used Konchesky, Vardy, Marshall, Logan (gk), Moore.
Watford (4-4-2): Almunia; Doyley (Hall, 85), Pudil (Briggs, 73), Cassetti, Ekstrand; Chalobah, Hogg, Anya, Abdi; Geijo, Vydra (Forestieri, 90). Substitutes not used Yeates, Eustace, Bond (gk), Battocchio.
Referee N Swarbrick (Lancashire).
Fans make their point to Poyet
Gus Poyet knows exactly what Brighton's play-off against Crystal Palace tomorrow night means to the fans – because they will not stop telling him. Despite it hardly being a local derby, fans of both clubs have a dislike of each other stemming back to the late 1970s
"I'm pleased I'm not living in the Brighton & Hove city because it's as if it's the last game of our lives when you talk to the fans," Poyet said. "We need to do what we can to make a lot of people proud of the players we have at this club."