Tony Carr's under-19s - still on course to top their group - have one of the best defensive records of all 38 Academy league teams this season, but capitulated against an excellent Villa side, who lifted the FA Youth Cup last year.
The midlanders took the lead on 12 minutes, but Hammers equalised almost immediately, when Marce Collington cut inside from the right and curled a beautiful left-foot shot into the top corner.
That sadly wasn't the start of a winning revival, though, and some poor defending from crosses saw Villa score two goals in quick succession to go in 3-1 up at the break.
The hosts then added a fourth early in the second half to put the result beyond doubt and, although Darren Blewitt grabbed a consolation when he finished well from Danny Morris' pass, Villa restored their three goal advantage late on.
Said Tony Carr afterwards: "It was very disappointing to see the team defend so poorly considering how strong we have been in that department this season.
"We had one of the best 'goals against' records before today, but I also have to give Aston Villa credit - they are the best team we have played so far and have some excellent players.
"We did contribute to our own downfall, though, and we could have made it a lot tighter and harder for them than we did.
"We haven't got another Academy game now before our FA Youth Cup match against Norwich, and we will have to play a lot better than this if we want to be in the next round.
"Hopefully this will serve as a bit of a wake up call, though, and I am sure the players will want to prove that it is only a one-off in what has still been a very successful season."
Team: Jackson, McClenahan, Tattam (Fletcher 80), Blewitt, Ward, Lumsden, Collington, McMahon, Mehmet, Pearson (Morris 75), Cole (Bunce 75). Subs unused: Sealey.
Meanwhile, the under-17s were also left reeling, as they lost 4-2 at home to Southampton, despite pulling the game back to 2-2 after being 2-0 down with 10 minutes remaining.
After Hammers had started well without creating any real chances, the visitors took the lead on 20 minutes when a corner wasn't properly dealt with, and added a second five minutes after the break.
The game evened out after that, with Hammers enjoying the majority of possession but not able to find a way through the Saints defence.
However, with 10 minutes remaining, the game exploded into life. Young striker Hogan Ephrain - still a member of the under-15 schoolboy squad and making his full debut at this level - collected a short corner on the edge of the area and beat one man before curling the ball into the top corner to give his side a lifeline.
Two minutes later, the Hammers were level. Chris Cohen was fouled in the penalty area and, after Mark Noble's spot-kick was saved, Ephrain followed up to net the rebound.
At that stage, a draw looked the likely outcome, but Southampton found another gear and restored their advantage with five minutes left when another set-play caused problems in the Hammers defence and was headed home.
Saints added a fourth in the final minute after breaking from a Hammers corner, and Kevin Keen was left to reflect on a disappointing outcome:
"It was a blow to concede two goals from set-pieces, because, having conceded that way against Southampton earlier in the season, one of the last things we said to the players before they went out was to be alert when defending corners and free-kicks.
"We actually started as the better team and played some good football in the second half without really hurting Southampton and the only difference between the sides was that they took their chances.
"We got back into it, though, thanks to two goals from Hogan Ephrain - who is playing two years above his age group - and at that stage I would have been happy with the point after being behind for so long.
"We let them in from a set-play again, though, and the fourth killed the game off. It was disappointing in the end, but Southampton are the best team we have played this season, and I don't think we are far behind them."
Team: Reed, Wright, Cohen, Henry, Parrington, Tucker (Cowley 80), Noble, Singh (White 70), Yao, Allen (Lee 60), Ephrain. Sub unused: Behcet.