The young Reds appeared on course to make it eight victories from nine Premier League 2 outings this season when Harry Wilson linked up brilliantly with Danny Ings and opened the scoring midway through the first half at Prenton Park.
However, the visitors levelled shortly before half-time through Admiral Muskwe and Sam Hughes snatched a late, late winner after a hard-fought second half.
Despite the setback, Critchley’s team remain two points clear of Everton at the top of the table ahead of the first mini-derby of the season in three weeks’ time.
And the manager expects his side to respond positively after absorbing the lessons Sunday’s defeat offers.
“To lose the game in that fashion is always disappointing,” Critchley told Liverpoolfc.com.
“We knew it was going to be a tough game and a different challenge to what we have faced so far this season. Leicester play different to most teams in this league and they do it very well.
“We had to stand up to a physical challenge and for the majority of the game we did, but if you don’t stand up to the game for the 90 minutes that is what they can do.
“The two goals we conceded, one from a long throw and one from a free-kick near the end of the game - we didn’t block a cross on one side of the pitch, didn’t block a cross on the other side of the pitch and didn’t defend in the box, and that is why we’ve lost the game.
“In so many ways this is a great challenge for us today and a great learning game.
“Unfortunately it’s not gone our way, but that was a man’s game and we needed men on the pitch. For the majority of the game we had that but we didn’t do it all the way through the game and that’s what has cost us in the end.”
After the blow of conceding late in the first half, Liverpool shaded a keenly-contested second period and twice went close through Ings before Lloyd Jones hit the bar after Hughes’ 93rd-minute winner - leaving Critchley to rue missed opportunities.
“We spoke about that before the game. We spoke about the first 15-20 minutes of each half, how it’s not going to be pretty and you have to earn the right to play,” he explained.
“[We said we’d need to deal with] lots of first balls and second balls and compete from longer balls, and then hopefully our ability will take over and we can keep the ball and run the legs off them a little bit.
“We did that in the second half and we knew we would start to create chances. Harry scored a fantastic first goal and we had a couple of chances in the second half and goals change games. If we would have scored one then I think we would have gone on to win the game.”
Critchley also praised the contribution of forward duo Ings and Dominic Solanke, who played for an hour in his first U23s appearance of the season.
“We spoke about hitting Dom and Danny before the game because they will press high and help us get up the pitch,” he said.
“I thought Dom and Danny did that extremely well for us and Danny is unfortunate he hasn’t scored again.”