Andrew Surman's contentious second-half penalty condemned Ian Holloway to his first defeat as Leicester manager.
Stern John volleyed Saints ahead acrobatically but Andy King unleashed a 35-yard rocket just before the break.
Stephen Clemence headed wide as City resumed well but Clemence was ruled to have handled in the area after a melee.
Surman netted after home protests were waved away and Bradley Wright-Phillips nearly made it 3-1 before Patrick Kisnorbo headed wide for the Foxes.
Leicester manager Ian Holloway:
"To say I'm incensed, shocked and bemused is an understatement. I would like anyone on this planet to tell me that was deliberate handball.
"The ball was spinning viciously and came down and bounced up and hit the
"He (Stephen Clemence) was looking the other way and not one Southampton player appealed for it."
Southampton boss George Burley:
"I'm very pleased with the performance because with Leicester having a new manager it was always going to be a difficult game.
"We were disappointed not to be in front at half-time but they scored a one in a million wonder goal and you cannot legislate against that.
"I was pleased with the determination we showed because apart from their goal Leicester didn't create any chances."
Leicester: Fulop, Sheehan, McAuley, Kisnorbo, Stearman, Newton (Ashley Chambers 60), Clemence, King, Hayes (N'Gotty 87), Hume, Cort (Sappleton 66).
Subs Not Used: Kenton, Maybury.
Goals: King 45.
Southampton: Davis, Wright-Phillips, Davies, Bennett, Ifil, Safri, Wright, Surman, Dyer (Hammill 85), John, Euell.
Subs Not Used: Bialkowski, Saganowski, Rasiak, Mettomo.
Goals: John 32, Surman 56 pen.
Ref: Richard Beeby (Northamptonshire).