Two first half Aaron O'Connor goals secured the three points for the Exiles, with City's consolation coming courtesy of an excellent Jamie Taylor header.
The Imps, who had striker Rob Duffy stretchered off with an ankle injury, dominated the second half but found that second goal elusive and were left to reflect on a second successive 2-1 away defeat.
David Holdsworth was once again able to name an unchanged starting line-up for this Blue Square Bet Premier game against table-topping Newport County AFC at their new home at Rodney Parade. There was a change on the bench, meanwhile, with new signing Mark McCammon replacing Vadaine Oliver.
It was a muggy afternoon in south Wales as referee Lee Swabey got things underway with City kicking off.
The Imps started brightly, enjoying the better of the early play, but were soon behind as, in the seventh minute, Newport's first attack of the game saw them edge their noses in front when a long ball from defence was flicked on by ex-Imp Jefferson Louis for Aaron O'Connor to latch on to before he drilled past Paul Farman.
City looked for a quick response with Adam Smith firing just wide but all in all it was a pretty scrappy opening quarter with efforts at goal at a premium.
In the 23rd minute a long Dan Gray throw caused problems for home stopper Lenny Pidgeley but the loose ball ran for the home side rather than a white shirted Imp. A couple of minutes later, Newport doubled their advantage with O'Connor helping himself to his second of the game.
O'Connor was given far too much space on the edge of the box and after he received the ball, the striker was able to turn before firing past Farman with his shot finding the net via the inside of the left-hand upright.
On the half-hour mark Gray was harshly cautioned for a trip on Andy Sandell and when City responded a long throw from the full-back just evaded Smith at the back post. Luke Daley then drilled wide from 20 yards with his appeals for a corner being laughed off by referee Swabey.
At the other end Louis got the better of Gray but fortunately his cross to O'Connor flew straight out for a goal-kick. Shortly afterwards both Rob Duffy and Ismail Yakubu needed treatment following a challenge midway inside the Newport have with the former coming off worse. A couple of minutes elapsed before a stretcher was called for and with the City striker helped off, Mark McCammon came on as his replacement.
Seconds after play restarted Louis caught Andrew Boyce with an arm with referee Swabey somehow spotting nothing wrong whilst in the closing stages of added time O'Connor sliced wide from 20 yards following a decent piece of build-up play by the home side.
HT: Newport 2 Imps 0
It was as you were as the hosts restarted proceedings and City were quickly out of the traps with a neatly-worked free-kick ending up with Boyce heading over from a Daley cross.
City kept up the pressure and in the sixth minute of the second half they pulled a goal back when a patient piece of build-up play ended with Gray whipping in a cross and there was Jamie Taylor to rise high before planting an excellent header past Pidgeley for his second of the season.
With the Imps on top, Newport boss Justin Edinburgh brought on Michael Flynn for Lee Evans, and shortly afterwards the first corner of the game came City's way with Taylor firing into the side netting.
On the hour mark Jake Sheridan replaced Adam Smith and he was quickly in the action as the Imps pushed for a leveller, being involved in a move which led to a corner which was hurriedly cleared by the home defence. Newport's response saw them win their first corner which Alan Power
Another quiet spell ensued, although City still looked the most likely to add to the scoring tally, before Ryan Charles came on for Aaron O'Connor for the home side.
A foul on Sheridan gave the Imps a great chance from a set-piece on the edge of the box and after Taylor saw his initial effort hit the wall, his follow-up effort clipped a home defender for a corner. This led to two more flag-kicks but that killer final ball continued to evade City.
A final change for the Imps saw Nicky Nicolau come on for Luke Daley in the 83rd minute; Nicolau going in to a midfield role, allowing Power to move forward. Shortly afterwards, Boyce appeared to be held back in the box as Nutter floated in a cross following a Gray throw-in.
The clock was ticking quickly for the Imps and in the final minute of normal time, a City corner saw Nicolau, Boyce and Gray all have efforts blocked. Four minutes of added time was then indicated by the Fourth Official.
Jake Thomson was cautioned for delaying the taking of a City throw-in before a City attack ended with Nicolau unlucky to see the ball go under his feet. Jake Harris then came on for Jefferson Louis as the hosts ate up some more seconds.
A foul on Charles earned Mills a yellow card for the last action of what turned out to be another disappointing outcome for the travelling band of fans to discuss on the long journey back to Lincolnshire.
FT: Newport 2 Imps 1