Liam Delap gave the Blues the lead but Aston Villa hit back through Morgan Rogers and Ollie Watkins to lead 2-1 at half-time.
Town made three changes with Kalvin Phillips, Chiedozie Ogbene and Jack Clarke coming into the side.
Phillips replaced Jens Cajuste in the middle of midfield, with the Swedish international left out of the 20-man squad.
Ogbene and Clarke, who was making his full league debut for the Blues, were on the right and left respectively with Wes Burns and Sammie Szmodics on the bench.
Omari Hutchinson, who again the number 10, was making his 50th league appearance for the club.
Villa made one change from the team which beat Wolves 3-1 last weekend with Leon Bailey replacing skipper John McGinn, who is out with a hamstring injury. Keeper Emiliano Martinez wore the armband.
Former Town defender Tyrone Mings was absent from the squad and sitting in the stands as he continues his recovery from his ACL injury, but Blues summer target Jaden Philogene was on the bench.
Following a minute’s applause for long-serving former club secretary David Rose, who died earlier in the month, the Blues got the game under way.
Quickly, however, Villa began to dominate and in the fourth minute Youri Tielemans was given the time to take a shot from distance, but the Belgian international’s effort flew well over.
But despite the visitors seeing all the early ball, the Blues took the lead in the eighth minute.
Villa made heavy weather of clearing after a Sam Morsy shot had been blocked and Phillips played in Clarke on the left of the box from where the former Sunderland man cut it back to Delap, who squeezed a shot between Martinez and the post, the striker’s second goal of the season. The Argentina international keeper will feel he should have done better.
Having gone in front, Town survived a penalty claim when Ollie Watkins went to ground under the attention of Jacob Greaves - if there had been a foul, it was outside the area with the Blues defender having hold of the England striker’s shirt - then soon after Pau Torres ran into Leif Davis as a free-kick came into the box, claiming he’d been fouled.
As the clock ticked past the 13-minute mark, the ground erupted into applause in tribute to 13-year-old Taylen Ireton, who was killed in a road accident last weekend.
Two minutes later, Villa were level. Greaves poorly cleared a cross to Rogers on the penalty spot and the several-time-Town-target exchanged passes with Watkins before hitting a shot across Aro Muric and into the net.
However, the Blues didn’t seem unduly affected by conceding such a poor goal and on 18 went close to going back in front, Axel Tuanzebe, facing the club where he spent three spells on loan, looped a header over from Davis’s corner.
Within a minute, Davis created another opportunity, crossing from the left to Clarke, who headed onto the roof of the net.
For a spell, the game became more even with the Blues seeing their fair share of the ball and preventing the visitors from seriously threatening.
But the Villans gradually began to take charge again and in the 33rd minute they took the lead.
After a long spell of patient possession, Bailey whipped over a brilliant looping cross from the right and Watkins got between Dara O’Shea and Tuanzebe to nod down and past Muric.
A great cross and well-placed header, but Town will again feel their defending might have been better, while keeper Muric may well have come for it.
The Blues set about getting back on terms and on 36 they weren’t far away. A Davis free-kick was half-cleared to just outside the area to the right from where Phillips smashed a powerful strike which Martinez superbly palmed behind to his left.
Town had another chance to get back on terms two minutes later when Davis played an inch-perfect through ball for Delap, putting the England U21 striker in on goal. However, Martinez was off his line quickly to divert the striker’s effort out for a corner with his left hand.
On 40, O’Shea was caught by a flailing Watkins arm, leaving the Irishman with a very evidently bruised eye. Referee Stuart Attwell took no action.
Three minutes later, Martinez was fortunate to grab a Town corner at the second attempt having collided with one of his own defenders. The keeper threw the ball out quickly, then took to the turf once the ball had gone out of play, holding his face. However, it came as little surprise when he was able to continue.
In the third minute of time added on, Morsy was booked for a foul on Pau, then Delap quickly joined him for protesting about an earlier challenge.
That was the last action of an incident-packed half, Delap leaving the field still in discussion with referee Attwell.
Town really oughtn’t to have gone off behind. Although Villa had seen most of the ball, the Blues had got their noses in front via Delap’s second Portman Road goal of the season, Town profiting from the Midlanders failing to clear their lines.
Villa’s leveller and then the goal which put them in front both owed much to similarly disappointing defending from Town with the Blues quickly learning that mistakes at this level are punished more clinically than in the Championship.
As in previous games, Town themselves had failed to show a similar cutting edge having created a number of opportunities.
Tuanzebe and Clarke both had decent headed opportunities and Delap had been unable to convert his one-on-one, while Phillips’s strike would have been a goal against poorer keepers than Martinez.
However, the Blues are far from out of it at half-time with more chances likely to come if the game follows a similar pattern after the break.
Town: Muric, Tuanzebe, O’Shea, Greaves, Davis, Morsy (c), Phillips, Ogbene, Hutchinson, J Clarke, Delap. Subs: Walton, Johnson, Townsend, Luongo, Taylor, Burns, Chaplin, Szmodics, Hirst.
Aston Villa: Martinez (c), Konsa, Carlos, Torres, Digne, Onana, Tielemans, Bailey, Rogers, Ramsey, Watkins. Subs: Gauci, Barkley, Duran, Buendia, Philogene, Nedeljkovic, Maatsen, Bogarde, Swinkels. Referee: Stuart Attwell (Warwickshire). VAR official: Darren England (Doncaster).