Boss Paul Lambert admitted the Blues were beaten by the better team after Peterborough left Suffolk having defeated Town 4-1.
Posh, who are up to third having won four in a row, were victorious at Portman Road for the first time in the league with their only previous win a 3-2 defeat of the Blues in the FA Cup in 1960 when a non-league club.
"We lost to the better team, the better team beat us. The goals were the most disappointing thing about the whole thing,” Lambert said.
"The first goal was really poor because I thought we should have won the ball in the middle of the pitch and then the penalty, it looked like a penalty from where I was standing.
"The second goal [when Sammie Szmodics took the ball off keeper Will Norris], you can’t legislate for that, that was probably a big moment in the game.
"But Will’s been great for us and he probably knows himself if you make a mistake as a goalkeeper you tend not to get too many second bites at it. We tried to rectify the mistake and the ball ends up in the net. That gave them a position to hold on to.”
With the scoreline 2-0 at the break Lambert brought on James Norwood for Alan Judge ahead of the second period.
"Just to change something and we started the second half not too bad,” he added. "For the third goal, Will [Keane] controls the ball great in the middle of the pitch, then the pass just gets cut out and they score a good goal, and that puts you on the back foot from there.
"We kept on going. The fourth one was similar to the third one but we kept going. We got the penalty, whether it was a penalty I don’t know.”
Lambert said the mood was unsurprisingly downcast in the dressing room but pointed out to the players that the overall situation the Blues are in is positive.
"Yes, but as I said to the lads, you’re four points from the top, you’ve got 15 games to go, there’s a helluva lot of football to be played and we’re going to have to handle the expectancy level at home, we’re going to have to handle that,” he said.
"But they shouldn’t have been too downbeat, yes, downbeat with the game definitely, but we’re five points from the top, there’s nothing in it and there’s a helluva lot of games to be played.”
Town had appeared to have turned a corner after their poor run during November and December but the defeats to Rotherham on Tuesday and now Peterborough have brought that revival to an abrupt halt.
"Yes, that happens,” he reflected. "If you’re going to go negative, negative, negative you’re going to kill the guys, the guys are going to get killed.
"We’re four points from the top, we have to stay with it. Peterborough are ahead of us, they’ve played a game more, there’s a helluva lot of games to get played and, as I said before, let’s see what happens in May.”
One again Town have come up short facing a team currently in the top eight with their results in their 10 matches against those sides, drawn six, lost four.
"In the six draws there are some games we should have won, we definitely seen them through. That’s the disappointing thing,” Lambert said.
"What’s put us in this position is the the whole season, not just the [games against] the top six or eight teams, everybody will say the same.
"It’s a difficult league, you’re not going to get it all your own way. If it was that easy, a massive club like Sunderland would have done it.
"You have to take the bumps. Five points is nothing really, that can easily be brought back.”
Lambert has admitted that the Blues were beaten by the better team in their last two games, should that be a concern for fans?
"It shouldn’t because the lads will bounce back as quick as they can,” he insisted. "We’re five points off it, it’s not a major disaster because we’ve so many games, even though teams are going well.
"Fifteen games is a helluva lot of football, the Easter games will determine a lot of stuff. There’s really a long, long way to go.”
Large numbers of fans left at 4-0, while there were sarcastic chants of second-choice keeper Tomas Holy’s name after Norris’s error and boos at the end.
"They pay a helluva lot of money to come and watch,” Lambert said when quizzed on the crowd’s reactions. "It won’t help the guys when things like that happen, but the guys under stand it.
"They’re young guys playing in front of big crowds every single week and it happens. You have to be big enough and brave enough to take it on the chin.
"All the fans want to do is see us win, everybody wants to see us win. The guys are big enough and brave enough.
"It’s not nice to hear because it’s our team and our player, but the fans pay a helluva lot of money and they’ve been brilliant, 22,000 in here is absolutely brilliant.”
Asked what Norris had said in the dressing room afterwards, Lambert said: "Obviously apologetic for what happened. He’ll know himself, he’ll be down, that’s for sure. But, as I said before, he’s a big enough character to bounce back from it.
"But he knows himself that if you’re a goalkeeper and you make a mistake, you’re the last man.
"An outfield player somebody’s back, if you’re a goalkeeper you’re the last line and you make a mistake things like that can happen.
"But I’m not going to chastise Will Norris or any of the guys because what they’ve done for me has been absolutely brilliant.
"We’re in a really good position, I’m really happy with the guys. OK, we’ve lost a couple of games but I’m not going to sit here and chastise anybody because they’ve been brilliant for me.”
Lambert says he’ll make a decision whether to stick with Norris at Sunderland next Saturday over the course of the week.
"I’ll do what I normally do, analyse, speak with the guys next week and see from there,” he said.
Regarding Luke Garbutt’s injury, he added: "Looks like his thigh at the minute. We’ll see how he feels, I don’t know about him.”
The Blues will be without Gwion Edwards at the Stadium of Light, the Welshman having picked up his 10th booking of the season.
"Yes, for two games,” Lambert said regarding his right wing-back. "I thought Gwion did alright today, he did OK.”
Lambert is hopeful that Emyr Huws (ankle) and Teddy Bishop (knee) will be fit for the visit to Wearside, but defender Josh Earl (cheekbone) is more of a doubt.
"There’s a good chance of they keep progressing,” he said of Huws and Bishop. "If there was a game midweek, I’m not sure but Saturday might give us that time.
"Josh Earl, we’ll see how he is. At the minute we don’t know about him yet, we’ll have to wait and see.”
Posh boss Darren Ferguson said: "To come to Ipswich and score four goals and win 4-1 is a fantastic result for the team.
"It was a real team effort, I thought my team were excellent, right from the off.
"The opening period of the game in any match is very important but today we thought that if we could get the first goal it would give us a right chance and that was the way it turned out.”
He added: "We went through a bad phase, which happens to most teams, but good players don’t become bad overnight.
"We have now won four on the trot and beaten the top three — the belief and confidence is back.”