Padraig Amond’s 85th-minute penalty put League Two Newport – 74 places below Premier League Leicester – into the fourth round.
Jamille Matt’s 10th-minute header looked like clinching their place only for Rachid Ghezzal to silence Rodney Parade with a stunning equaliser from 30 yards seven minutes from time.
But Leicester manager Claude Puel, who was heavily criticised for making seven changes for their recent Carabao Cup quarter-final against Manchester City, which they lost on penalties, will be under scrutiny again after doing the same at Rodney Parade.
It was a year minus a day since the Welshmen famously knocked Leeds United out of the Cup at the same stage.
Now they have done it again, this time beating top-flight opposition in the competition for the first time since 1964, when they defeated Sheffield Wednesday 3-2 at home in the third round.
Leicester had plenty of chances galore to have won the tie convincingly – including hitting the bar through Marc Albrighton – but were so wasteful against a side who had only won one of their previous eight games.
Despite their changes, Leicester still carried plenty of experience, including three of the back four who won the Premier League title in 2016, and six title winners in total.
They first went close to scoring in the fourth minute. Ghezzal’s curling, first-time shot was superbly palmed away by goalkeeper Joe Day after a scramble in the box.
Newport quickly punished them as Matt put the Welsh side in ecstasy in the 10th minute with a brilliant goal.
The 29-year-old striker lost Wes Morgan and headed in Robbie Willmott’s inviting cross off the inside of the post for his 14th goal of the season.
Leicester missed two golden chances to equalise. Albrighton’s sidefooted effort was deflected wide after Christian Fuchs did well to keep the ball in then cross, then the unmarked Shinji Okazaki somehow headed wide from a couple of yards out after Ghezzal’s corner had been nodded back to him.
Ghezzal’s poor luck in front of goal continued as he curled a free kick wide.
Matt could have grabbed a second goal for Newport on the half hour, but just couldn’t make a proper connection as he slid in from point-blank range to connect with Amond’s cross.
Leicester had two more opportunities to level before half-time, but Albrighton glanced wide from Ghezzal’s corner, then Okazaki’s low volley was blocked by Mickey Demetriou, who was playing in a protective face mask.
Leicester introduced James Maddison at half-time in a bid to get back into the game, for Okazaki.
The visitors immediately looked to carry more of a threat and Day held a header from Kelechi Iheanacho after Ghezzal centred.
Leicester went desperately close to an equaliser in the 54th minute, when Albrighton’s curling shot from 25 yards smacked against the bar and bounced to safety after he cut in from the left.
Puel threw on Demarai Gray for Danny Simpson to add more of an attacking threat and Iheanacho was next to try his luck, sending a sliding volley the wrong side of the post with Day to beat on 63. Then Maddison’s shot was blocked after a cross caused chaos in Newport’s box.
Leicester continued to dominate but they couldn’t find a way through Newport’s packed defence, until Ghezzal’s stunning strike, which came after Day superbly blocked Iheanacho’s header.
But Newport hit back when Albrighton handballed a cross and Amond calmly sent Danny Ward the wrong way from the spot for his 16th goal of the season.
Debutant Vashon Neufville, on loan from West Ham, almost made it 3-1 Newport with a deflected shot turned wide before Maddison curled a fraction wide at the other end.
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