Adrian Forbes’ side came into to their fourth group game knowing only a win would do to keep their hopes of making the knockout stages alive after three earlier defeats in the competition.
The early signs were good as the young Hatters played on the front foot throughout. Jayden Luker came close with their first chance in the 20th minute only to be denied by a smart save from Chelsea goalkeeper Eddie Beach.
The Blues were inches away from taking the lead on the half-hour mark when Tyrique George rustled the side-netting, but minutes later Mads Andersen saw a shot blocked from ten yards.
Forbes’ side came closer to breaking the deadlock a minute before half-time when Zack Nelson turned well in the box but saw his effort charged down in the penalty area.
But all the Town’s good work in the first half was undone on 11 minutes after the restart when the visitors took the lead. A long ball forward was knocked into the path of Zain Silcott-Duberry and his scuffed shot rolled agonisingly into the corner of the net past Tim Krul.
Krul did well to prevent Chelsea doubling their lead shortly afterwards but the Hatters came mighty close to levelling the score on 66 minutes when Beach brilliantly stopped Luker’s low shot which was heading for the bottom corner.
That save proved crucial as, with 16 minutes left on the clock, Chelsea made it 2-0 when George thundered home a magnificent shot from 30 yards giving Krul no chance.
However the Town rallied, and Forbes’ side halved the deficit with eight minutes left when substitute Millar Matthews-Lewis crashed home from close range after Chelsea failed to clear Jake Burger’s right-wing corner.
Seven minutes were added at the end of the 90 but, despite pushing for an equaliser, Chelsea held on to condemn the Town to defeat.
Town: Krul, Pinnington, Johnson, Tompkins, Andersen (sub Bateson 60), Francis-Clark, Piesold (sub Phillips 79), Burger (sub Heron 90+4), Lynch (sub Matthews-Lewis 79), Nelson, Luker.
Sub not used: Horlick.
Attendance: 908