Pep Guardiola opted to field a strong side, which included a first club start since 6 November for Kevin de Bruyne, despite last season’s runners-up having sealed top spot in Group A with one game to spare
But the Premier League leaders finished the six-match group stage without a clean sheet after Hungary midfielder Dominik Szoboszlai and Portugal forward Andre Silva scored for Leipzig, who parted company with their manager over the weekend.
City also finished with 10 men after Kyle Walker was shown a straight red card in the last 10 minutes for an unnecessary foul on Silva.
Szoboszlai had rounded keeper Zack Steffen to open the scoring before Silva, who had earlier been denied by City’s second-choice keeper, doubled the lead with a neat finish.
The visitors, who put six past Leipzig at Etihad Stadium in September, suffered a frustrating night at an empty Red Bull Arena with Phil Foden having a shot tipped on to the post before Riyad Mahrez reduced the deficit with a diving header.
City finish group without clean sheet
City, who will discover their last-16 opponents on Monday, end their group campaign with 12 points from six games – and no clean sheets.
In addition, the late dismissal of Walker means the England defender faces a suspension when his side resume their European campaign in February.
Just days after Guardiola had praised his team for a performance that propelled them to the summit in England, City produced a disjointed display in Germany.
Surprisingly, with a busy December schedule ahead, Guardiola opted to field the likes of Ilkay Gundogan, Fernandinho and Foden, who was replaced at the start of the second half, for what was effectively a dead rubber
Nineteen-year-old forward Cole Palmer was sent on three minutes from the end of normal time but fellow teenagers Conrad Egan-Riley, Josh Wilson-Esbrand, Romeo Lavia and James McAtee were unused.
At least De Bruyne got some vital minutes under his belt after recovering from Covid-19.
He forced Peter Gulacsi, who left Liverpool in 2013 without playing a league game, into a fine save from a free-kick on the stroke of half-time.
However, De Bruyne ended the match with what seemed a harsh booking after not following the referee’s instructions when City were awarded another free-kick.