Phil Parkinson's young Black Cats couldn't build on their impressive first half performance as they were defeated by Fleetwood Town.
Two second half goals for Joey Barton's side, gave the Fishermen all three points in the final game of the Papa John's Trophy group stages.
Elliot Embleton was among the pick of the Black Cats players after hitting the post and impressive set pieces.
Sunderland started the game on the front foot and took the lead through Callum McFadzean - who turned in another performance before going off injured on the 56 minute mark.
Hill's slack pass was intercepted by Hawkes, he tried to play in O'Brien inside the box but it was cut out and the ball broke to McFadzean inside the box on the left, with his low strike going in off the right hand post.
Sunderland were lively and hit the woodwork three times in the first half.
The Black Cats were hit by a wave injuries on the brink of half-time and in the second half. Oliver Younger, Cieran Dunne and McFadzean were all forced off the field of play after lively starts.
The injuries changed the dynamic of the game and the hosts equalised through Barrie McKay, before Mark Duffy grabbed the winner on the 56th minute.
It was a spirited performance from the youngsters, but the result means Sunderland will now be drawn away from home in the next round.
Here's how James Hunter rated the Black Cats performance:
ANTHONY PATTERSON 7BRANDON TAYLOR 7
JORDAN WILLIS 7
OLLIE YOUNGER 7
JACK DIAMOND 7
GEORGE DOBSON 7
ELLIOT EMBLETON 8
DAN NEIL 7
CALLUM McFADZEAN 7
JOSH HAWKES 7
AIDEN O’BRIEN 6
SUBS
CIERAN DUNNE 6
VINNIE STEELS 6
SAM WILDING 6