The Foxes had started the evening in pole position to advance from Group C but will now drop into the Europa Conference League knockout play-offs in February.
A dramatic conclusion to the evening saw Leicester almost given a late reprieve because of events over 1,000 miles away in Poland, when a stoppage time penalty was awarded to Legia Warsaw in their fixture against Spartak Moscow.
But Tomas Pekhart’s spot-kick was saved by Spartak goalkeeper Aleksandr Selikhov, to ensure his side progressed as group winners instead of slipping down to third.
Leicester manager Brendan Rodgers will be aware his side contributed heavily to their own downfall against an injury-ravaged Napoli side.
Adam Ounas’ early goal set the tone for an error-strewn display, with Caglar Soyuncu’s ill-advised pass beginning the passage of play that saw the Algeria winger register his first Napoli goal since April 2019.
Ryan Bertrand was at fault as Luciano Spalletti’s side extended their lead, playing Andrea Petagna onside, with the forward in turn squaring for Eljif Elmas to tap home. But the Foxes responded in superb fashion with Jonny Evans driving in an immediate response after a free-kick was only partially cleared and Kiernan Dewsbury-Hall levelling matters with a superb left-foot volley from the edge of the penalty area.
However, another defensive lapse, from a Leicester side whose last clean sheet came on the opening day of the Premier League season, proved decisive.
Bertrand, Harvey Barnes and Timothy Castagne were all guilty of not marking tightly enough as Giovanni di Lorenzo picked out Elmas, who allowed the ball to run across his body before driving it into the bottom right corner.
Familiar failings cost Foxes
Leicester travelled to Italy in the knowledge that several permutations, including a defeat, could have seen them advance, while Napoli knew that only a win would suffice.
And while Napoli shook off some patchy Serie A form to achieve their objective, Leicester’s struggle for consistency, and the passive defending which has underlined an underwhelming campaign so far, continued.
On paper the Foxes’ strong starting XI, including the likes of Youri Tielemans and Jamie Vardy, looked more than capable of having the measure of a side shorn of Kalidou Koulibaly, Victor Osimhen and Lorenzo Insigne amongst others.
But there was little evidence of that on the pitch, bar a 20-minute period at the end of the first half when they recovered from a two-goal deficit.
While James Maddison struck a post and Evans emerged as the only Leicester defender worthy of credit, they have now conceded two goals or more in five of their past six matches and worryingly also have a combination of Covid-19 cases and illness in the squad to contend with.