Oliver Reiss’ side were edged out at the Joie Stadium with the visitors grabbing a goal in either half.
City created plenty of opportunities throughout the 90 minutes, registering over 20 shots on the PSG goal, but couldn’t convert against a well-drilled opponent.
The visitors took the lead in the 15th minute through Mamadou Meite, with Adam Ayari grabbing a second with ten to play.
Both efforts came on the counter attack, with Meite’s measured finish back across goal putting the visitors ahead.
Kaiden Braithwaite thought he’d drawn City level soon after when his near-post header tested Arthur Vignaud in the PSG net, with the defender then flashing a low effort just wide of the mark from the edge of the area.
The elusive equaliser almost came after the break though when Vignaud scuffed an attempted pass across goal, with the ball trickling just beyond the post.
That close call summed up a frustrating afternoon for City, who conceded a second when Ayari was first to a loose ball in the box.
It means the Blues are still searching for a first UEFA Youth League win this season after also being edged out by FC Porto.
Watch the highlights from the game via the video above...
