A calamitous second half saw the Clarets concede six times to lose for the first time under the guidance of Tony Philliskirk.
Burnley have stayed in contention for a top-two finish in the U18 Professional Development League thanks to an unbeaten nine-match run since the start of December.
But their play-off hopes suffered a major blow in a dramatic turn-around at the Barnfield Training Centre.
The Clarets led 2-0 at the break thanks to goals from Ben Woods (above) and Jayden Major.
But Birmingham hit back with three goals inside two minutes immediately after the re-start.
And a youthful Clarets side – with just one second-year scholar in their ranks – then had no answer to a more powerful City line-up which added a further three goals in a five-minute blast to end their four-match losing run.
The Clarets couldn’t have made a better start as Under-16s midfielder Woods slotted them ahead with a neat finish from Chris Conn-Clarke’s through-ball.
Joel Connolly then crashed a long-range effort against the bar as Burnley dominated.
And when Vinnie Steels released Major to steer home the second goal, Philliskirk’s side looked in control.
But the Blues looked a different side after the break as they played with the breeze behind them and got the ball forward earlier to expose Burnley’s back line.
Winger George Baker followed up a smart save from Harry Allen to pull a goal back seven minutes into the second half.
And in the blink of an eye the visitors were in front, Aiden George crashing home the equaliser before George grabbed his second to make it 3-2.
Conn-Clarke had a sight of goal at the other end in a brief respite for the Clarets but lifted his shot over the top after the lively Steels had again made progress on the left flank and Will Harris teed up the Burnley skipper.
But that was the last real threat from the hosts as midfielder Kane Thompson-Sommers (above) opened up a two-goal lead for the Blues with a fine individual effort.
George then helped himself to his second before Thompson-Sommers became the third of the City line-up to grab a brace when he curled in the sixth goal direct from a corner.
The defeat leaves the Clarets fourth in the league’s northern group, and with just three games to go their chances of catching the top two of Sheffield Wednesday and Leeds look close to being over.
Burnley: Allen, Connolly, Rain, Woods (Tucker 62), Pruti, Conley (Chima 82), George, Conn-Clarke, Major (Fenlon 62), Harris, Steels. Substitute: Calderbank-Park.
Birmingham City: Bradley-Hurst, Kinina, Roberts, Thomson-Summer, Gordon, Forest, Mayuba, Campbell, Okoro (Hilton HT), George (Traore), Baker (Powell).