Town's FA Youth Cup dreams were ended when their rescheduled fifth round tie against Watford finished in a defeat by the odd goal in five. Ronan Murray and Jack Ainsley scored for Town, while Marvin Sordell netted a hat-trick for the Hornets.
Paul Watson returned to the side after injury, but Bermudian international Reggie Lambe was suspended.
As in so many recent games, Town's U18s were caught on the back foot early and it took just three minutes for the Hornets to take the lead when Marvin Sordell glanced a header past Lewis Ward.
Watson headed off the line and Ward made a fine save as Watford looked to extend their lead and it was the tenth minute before Blues mounted their first attack with Connor Wickham shooting into the side netting.
After 20 minutes Town had what appeared to be a good goal disallowed. Paul Watson powered a header from a Dunbar corner that was ruled by the linesman not to have crossed the line before being hooked clear.
Town seemed to run out of ideas as the half progressed and had only a Ronan Murray header to show for their efforts.
After the break Ward made two great saves and Jamie Griffiths was Blues first substitution replacing Matt Daniels.
Watford made in two after 55 minutes when Sordell produced a subtle chip to score his second.
As Town continued to struggle to find their form, Billy Clark replaced Dave Cawley and Jack Ainsley was thrown up front. The changes seemed to do the trick and Watford were suddenly on the defensive and it was no surprise when good work by Ainsley ended in a cross that Ronan Murray headed home.
It was all Town now and six minutes from time Connor Wickham battled for possession before crossing for Jack Ainsley to fire home at the far post to send the crowd wild.
With moments remaining in normal time Jamie Griffiths hit the bar with the ball rebounding into the arms of the grounded Watford keeper.
Extra-time was punctuated by numerous stoppages as players collapsed with cramp and penalties were looming before Sordell broke away to scramble the winner past the despairing dive of Lewis Ward.
Sam Brandon replaced Tom Eastman, but there was no way back for a shattered Town and the match petered out to a heartbreaking defeat in front of a disappointing crowd of 1,823.
Town's U18s have the chance to get back on the winning trail when they entertain Norwich City at the academy next Saturday, kick-off 11am. The Canaries' Youth Cup hopes were also ended at the hands of Manchester City.
Team â€" Ward, Clemo, Dunbar, Eastman, Ainsley, Watson, Daniels, Cawley, Wickham, Murray Hyam (c). Subs. Clark, McLoughlin, Griffiths, Brandon.
Thanks to Paddy Lillistone for the report.