Despite late goals from Wanderer Liam Youlley and Sydney FC's George Blackwood, Australia weren’t able to complete an incredible fightback, going down 3-2 at the Khalifa Sports City Stadium.
The defeat means Ufuk Talay’s side has dropped to third in Group D, level on points with Tajikistan.
The Young Socceroos face Tajikistan in their final group match on Friday, with the winner to book their spot in the quarter finals.
The young Aussies need to reach the semi-finals of this tournament to qualify for next year’s FIFA U-20 World Cup in South Korea.
WHAT THEY SAID
"Tonight we got punished for our mistakes. I still think we played quite well at times and we weren’t clinical enough in front of goal and we had chances to score,” the Young Socceroos boss said.
“Of course we’re never happy losing games but we have everything to play for in the next game.
"I think Uzbekistan’s structure defensively was quite good and we found it hard to get behind them. It was because of our defensive errors that we conceded goals.
“It was one of those games where we didn’t create enough and we weren’t clinical enough, but that’s football."
The Young Socceroos were dealt an early blow when attacker Steve Kuzmanovski was forced off with a knee injury.
Just before the half hour mark Uzbekistan took the lead through Bobir Abdixolikov, before a brace either side of the break to Doston Ibragimov made it 3-0.
But a red card to Islomjon Kobilok 11 minutes into the second half swung the momentum and the Young Socceroos came roaring back.
Youlley cut the deficit from the penalty spot on 63 minutes and despite huge spells of pressure, the Young Socceroos had to wait until injury-time to score again via another penalty, this time converted by Blackwood.
But the Aussies ran out of time to find an equaliser a now face a winner-takes-all clash with Tajikistan to reach the last eight.