When Grealish came in as a second-half replacement after his British record £100 million ($139 million) move from Aston Villa on Thursday, all eyes were on him.
Grealish came on in the 65th minute to replace Sam Edozie, who had been training with his new teammates for the first time on Friday. He looked energetic in his cameo appearance.
Grealish's debut game in a City shirt, however, ended in defeat as Iheanacho scored the game-winning penalty after the Nigerian was brought down by Nathan Ake.
City will be unconcerned if they lose in the customary prelude to the English Premier League season if they can repeat their great form from last season, which saw them win the Premier League and the League Cup.
Guardiola acknowledged City's interest in Tottenham striker Harry Kane on Friday, but his club lacked the cutting edge the England captain would undoubtedly offer.
City's best hope is to persuade Tottenham to sell for less than their £150 million ($208 million) asking price, but they could be wise to splash on the evidence of this fairly lackluster performance.
Guardiola fielded a weaker team including teenage debutant Edozie and fellow academy graduate Cole Palmer, with several other City stars resting after Euro and Copa America action.
Leicester's second Community Shield victory — and first in 50 years — demonstrated that they can build on last season's FA Cup victory.
– Grealish quality –Brendan Rodgers welcomed back Harvey Barnes, who had not played since February due to a major knee injury.
Barnes showed no signs of rust with a blistering low drive that produced a good save from Zack Steffen.
City threatened early on as Kasper Schmeichel brilliantly tipped over Ilkay Gundogan's free-kick.
Guardiola's displeasure with City's troubles reached a boiling point when he was booked for an aggressive outburst at the fourth official after Palmer was penalized for a foul.
When Vardy met Barnes' cross with an agile half-volley that was pushed into the post by Steffen, he was inches away from opening the scoring.
Grealish was greeted with rapturous applause early in the second half, but wayward finishes from Gundogan and Riyad Mahrez squandered decent chances for City to take the lead.
Grealish, who was wearing the number 10 shirt, received a lot of attention as he slid around the final third looking for space.
After an incisive burst, the Premier League's most fouled player felt he had won a free-kick on the edge of the area, but Paul Tierney waved play on.
Bernardo Silva's move into the Leicester area was picked out by Grealish's clever ball, but his teammate's cross was not up to par.
Despite Grealish's brilliance, it was Leicester who emerged victorious courtesy to Ake's gaffe.
When Ake was caught in possession by Iheanacho, he obviously tripped the striker, giving the Leicester star a penalty that he hammered high into the net.