Despite dominating the game for long periods, City left Milton Keynes with no points to show for their afternoon's work thanks to Aaron Wilbraham's strike early in the second half.
Wilbraham finished coolly from close range after collecting Mark Carrington's pass as City failed to clear a corner on 53 minutes.
Despite Mk Dons' impressive home record it was City who made all the running early on, stringing neat passing moves together all across the pitch as the hosts struggled to cope with City's dynamic 3-5-2 formation.
Midway through the first half City thought that their dominance had paid off when, from Steve Tully's cross-field ball, John O'Flynn chested down and swept into the back of the net only to see the linesman's flag up for offside.
City continued to press on, the increasingly influential Ryan Harley weaved his way to the edge of the box before bring a smart stop from keeper David Martin and O'Flynn came agonisingly close to finding strike partner Richard Logan with a low cross.
Paul Jones cut a lone figure in goal in front of the 606 travelling fans as City limited their opponents to the occasional harmless pot shot from distance.
With the first half in its final stages further attacking situations were wasted by City with poor crosses too often ruining excellent build up play.
The 0-0 half time score line was not the reward that Paul Tisdale's men deserved, but it did give them an excellent platform from which to go on and win the game.
The second half began with Mk Dons finally applying some pressure of their own, Sam Baldock got the better of Golbourne and from his pull back only a desperate covering block from Rob Edwards saved Jones from being called into action.
Soon after came the MK Dons' sucker punch goal, a corner was only half cleared and from Carrington's lofted pass Wilbraham was allowed far too much time as he calmly controlled the ball before expertly clipping it over the helpless Jones.
City continued to pass the ball with ease pulling their opponents all over the pitch as they searched for the equaliser, but the Mk Dons backline were standing firm.
Harley and O'Flynn again asked questions of Martin in goal but the door remained firmly shut. Troy Archibald-Henville, James Dunne and Jake Thomson were brought on for Edwards, Tully and the hard working David Noble as City seeked fresh ideas.
Thomson looked particularly impressive beating the full back on several occasions and whipping in dangerous crosses, but each one was hacked to safety.
In pushing for a goal it was inevitable the gaps would appear in City's back line. From a Harley corner the home side broke swiftly and substitute Jermaine Easter found himself with a free run on goal but Jones stood up tall and thwarted the former Argyle man with a terrific save before smothering it at the second attempt.
As the game entered into the four minutes of stoppage time MK Dons' time wasting tactics became almost farcical to the point where Tisdale himself felt the need enter the field of play to retrieve the ball, an incident that saw Martin booked and the City boss reprimanded by the referee.
Richard Duffy was also shown a yellow card for an altercation with Baldock and Archibald-Henville clashed with Jabo Ibehre as City's frustration at trailing became clear for all to see.
The final whistle was not greeted by boos or cheers, but head scratching as City management, players and fans alike were left to wonder how they had failed to get something out of the game.