The Hatters suffered a rare defeat at Peterborough tonight as first-half goals from Colin Daniel and Ivan Toney proved enough to see the Posh through to the second round along with Nathan Jones' side.
Posh goalkeeper Conor O'Malley let Matty Pearson's cross slip through his hands to halve the deficit with just over a quarter-of-an-hour to go, but the Town couldn't claw the two goals back and suffered a first defeat in six matches, but second at the ABAX Stadium this season after the 3-1 reversal in the league back in August.
With the Town already through to round two as group winners, Marek Stech made his return to the team almost three months since his last appearance, ironically on the same ground, while Jack James came in for his first senior start.
The Republic of Ireland Under-19s international started on the left side of a back four that had Matty Pearson at right-back, with Lloyd Jones and captain Alan Sheehan in the middle.
Alan McCormack was in the midfield holding role with Arthur Read, Kazenga LuaLua and Jorge Grant ahead of him, supplying Aaron Jarvis and Harry Cornick up front.
The Hatters started brightly and had the ball in the net in the fifth minute when Grant and LuaLua combined well on the left with the latter crossing for Jones to steer an effort goalwards, but Jarvis was in an offside position when he tapped over the line from close range.
Read saw a shot saved by Conor O'Malley a minute later, but from then on – bar a brief burst to the byline from Cornick, who saw his low cross go begging - it was all Peterborough.
They were ahead in the 19th minute when Marcus Maddison crossed from the right and left-back Daniel stole in to volley past Stech and into the bottom corner.
Posh midfielder Jamie Walker fired into the side-netting on 26 minutes, before Maddison – who had already seen an early sighter fly high over the bar – aimed a 20-yard shot straight at Stech on the half-hour, the big Czech keeper beating it away.
Six minutes later, Posh doubled the advantage. McCormack miscontrolled in the centre circle and then tripped Toney just outside the area as he tried to chase the striker. The ex-Northampton and Newcastle man took the free-kick himself, bending it around the wall and into the top corner, giving Stech no chance.
Peterborough the first out of the traps in the second period, Callum Cooke letting fly from distance in the 49th minute, but his 25-yard effort just cleared Stech's crossbar.
Daniel was soon becoming the first name in ref Andy Woolmer's notepad for a foul on Pearson, and he was quickly joined by McCormack, for a trip on Siriki Dembele
Once they'd blocked the free-kick, which Dembele aimed straight at the wall, the Hatters launched a lightning quick counter, LuaLua spreading the ball to the left to Grant, who found Cornick sprinting to the right of the area, but the forward's shot was off target.
Grant and Jarvis soon combined to tee up LuaLua for a left-footed shot that was destined for the bottom corner until O'Malley stuck out a big left hand and turned it behind for a corner.
Cornick had another chance in the 59th minute when LuaLua pounced on a loose cross from Daniel and broke quickly, feeding Grant to set up Cornick once again, this time O'Malley saving well before the Town forward's attempted cut-back was blocked.
Seconds later, skipper Sheehan came as close as anybody to dragging the Town back into it, meeting Grant's deep right-wing cross with a firm header that went inches the wrong side of the far post.
As in the league game earlier in the season, the Hatters were enjoying the majority of the second-half possession, and the chances, despite trailing – LuaLua the next to test O'Malley with a volley from outside the area with 20 minutes to go after the home defence could only half-clear.
Stech had to be alert to push a Darren Lyon cross-shot away in the 73rd minute, and within seconds the Town were back in business, as Pearson's cross from the right caught O'Malley out, the Posh keeper letting the ball slip through his hands and inside the far post.
Town were playing with much more conviction and Cornick drifted across the edge of the penalty area before unleashing a powerful shot that O'Malley pushed away from the bottom corner, before Read and LuaLua traded passes to give Grant the opportunity to whip in a dangerous looking cross that was just a shade too far in front of Cornick.
Pearson had a chance to net again in the 77th minute, Sheehan's corner giving him a free header but he directed it down into the ground and O'Malley gathered comfortably as it looped up towards the top corner.
The Hatters continued to have most of the ball, but couldn't find a way past O'Malley and finished with what was just a second defeat in 13 matches in all competitions, but still take their place in Friday's second round draw on talkSPORT2, with a home tie guaranteed as group winners.
TOWN: Stech, James, Pearson, Jones, Sheehan ©, McCormack, Grant, Read (Justin 84), LuaLua, Cornick (Neufville 89), Jarvis. Subs: Isted, Bradley, Stacey, Rea, Mpanzu.
GOALS: Pearson 73
POSH: O'Malley, Lyon, Bassong, Bennett ©, Daniel, Reed, Cooke (O'Hara 83), Walker, Dembele (Buckley-Ricketts 83), Maddison (Cooper 90), Toney. Subs: Chapman (GK), Naismith, Godden, Cummings.
GOALS: Daniel 19, Toney 36
ATTENDANCE: 2,017 (254)