Matthew Upson celebrated his first full 90 minutes for West Ham with a goal but Alan Curbishley's side were beaten by an MK Dons side managed by former Hammers midfielder Paul Ince.
Upson has suffered an injury nightmare since his £6million move from Birmingham in January but looked composed throughout as a near full-strength Hammers side were beaten by Leon Knight's late strike.
Freddie Ljungberg enjoyed a typically energetic 67 minutes on his debut while Dean Ashton was rested after his goal at Leyton Orient last night.
The League Two Dons were without star striker Izale McLeod who continues to seek a move away from the club, but took the lead in the ninth minute through Mark Wright.
Lloyd Dyer exchanged passes with Dean Lewington down the left before whipping in a teasing cross.
The ball evaded Drewe Broughton but Wright sidefooted his effort back across goal and, despite the frantic efforts of former England goal keeper Richard Wright the ball crept in.
Dyer then caused more mayhem with another fine run and cross before Curbishley's side equalised in the 16th minute.
A terrible touch from Dons defender Drissa Diallo was seized upon by Luis Boa Morte and the former Fulham man drew goalkeeper Luke Steele before squaring for Hogan Ephraim to tap home.
And the Hammers went ahead just three minutes later through Upson.
Boa Morte was again the provider with a fine free-kick which found Upson unmarked at the far post.
Steele brilliantly kept out his first header but Upson hooked home the rebound from five yards.
The Dons levelled seven minutes into the second half when skipper Keith Andrews slammed home a penalty after Jonathan Spector pushed Broughton.
Ljungberg then brought another save from Steele before Knight struck in the 77th minute to silence the travelling hordes of Hammers fans.
Substitute Nick McKoy got to the byline and his pull back was finished clinically by Knight to give Ince the last laugh.