Jovon Makama's cool penalty finish was not enough to keep the Imps in the Emirates FA Cup despite an impressive second-half performance at Birmingham City.
An early strike from the impressive Ayumu Yokoyama, coupled with a stunning individual effort from Lyndon Dykes, ultimately did the damage.
City pushed and were clearly the better side in the second half. Makama pulled a goal back but the home side managed to hold on.
Head coach Michael Skubala made three changes. Zach Jeacock came in to replace the injured George Wickens in goal, while Dom Jefferies and Jack Moylan were also brought in.
City changed formation to be more attacking, with a back three and wing-backs looking to get forward and support attacks where possible.
The home side took an early lead when Japan youth international Yokoyama got on the end of a cross from the right, cut inside and fired home with a smart finish.
Yokoyama was a bright spark, and having caught the eye in the top flight J.League before moving to England he is a real talented player.
The Imps showed composure to work their way back into the game, with the first real threats coming after nine minutes.
A Sean Roughan free-kick was headed into the area by Paudie O'Connor, looking for the front two of Jovon Makama and Bailey Cadamarteri, but it was scrambled clear.
And a chance created after Conor McGrandles won the ball back on the right led to Makama laying the ball off into the path of Moylan, but his first-time effort went just wide.
City contained Blues, with the most expensively assembled squad in League One, and maintained an attacking outlook looking to draw level.
Moylan sent Cadamarteri through after 19 minutes, but the on-loan man was closed down well by Christoph Klarer to prevent a shot.
And Moylan saw a further effort blocked after a pull-back from Temdayi Darikwa.
Chances for the home side were limited, but it took a stunning save from Zach Jeacock to tip Lukas Jutkiewicz's header over.
With just one goal in it there was plenty of endeavour from the Imps, with good pressure from the right - both Darikwa and McGrandles put in dangerous deliveries - ending in Cadamarteri going close.
And, just before the break, McGrandles could not keep his shot down after a cross from the left was only partially cleared.
City started the second half with a real sense of purpose as they looked to find a way. back into the tie, with home keeper Bailey Peacock-Farrell and his defence scrambling to clear a number of early crosses into the box.
Ethan Erhahon almost found Moylan in the area, while it needed a vital headed interception to prevent Jefferies' left-wing cross finding Cadamarteri.
And, after 55 minutes, Erhahon tried a shot from distance which Peacock-Farrell held at the second attempt.
The Imps had enjoyed all of the ball in the opening exchanges of the second period, with Cadamarteri doing well to get a shot away from Roughan's long-throw.
We were at the hour mark before the home side threatened again, with a left-wing cross which Jeacock had covered.
City had clearly been the better side in the second period, and head coach Skubala made a triple change after 69 minutes to send on the fresher legs of Tom Bayliss, Freddie Draper and Reeco Hackett. That reshuffle saw Jefferies move to the right with Hackett in an attacking role off the left wing.
The Imps continued to have the best of the play but were undone by a moment of magic from Lyndon Dykes. He got on the end of a long ball, and unleashed an unstoppable shot from range which looped into the top corner leaving Jeacock with no chance.
That goal inevitably took the sting out of the match. City did keep fighting, with Draper going close with a header.
The pressure did lead to a penalty for the Imps after Lewis Montsma was fouled in the area. Makama stepped up to calmly slot the ball home and set up a grandstand finish.
There were a dramatic five minutes of time added on, with the Imps completely pegging the home side back.
And they went agonisingly close when Draper flicked a header just wide from a corner in the last significant moment of the match.
Imps: Jeacock, Darikwa (Hackett, 69), Montsma, Erhahon, Cadamarteri (Draper, 69), McGrandles (Hamilton, 82), O'Connor (c), Jefferies (Ring, 86), Roughan, Makama, Moylan (Bayliss, 69). Subs: Pardington, Jackson, Duffy, Okoro.
Blues: Peacock-Farrell, Klarer, Jutkiewicz (c) (Seung-Ho, 73), Wright (Laird, 62), Leonard, Dykes, Gardner-Hickman, Cochrane, Sampsted (Chang, 73), Harris (Betteka, 87), Yokoyama (Willumsson, 74). Subs: Allsop, May, Iwata, Davies.
Attendance: 17,032 (1,418 away).
Referee: Martin Coy.
