Jose Callejon and Karim Benzema put the Spanish Cup holders in control at the King Power Stadium before Lloyd Dyer's late reply.
Eriksson included six of his nine summer signings in the City starting line-up, with fellow new recruits Sean St Ledger and Michael Johnson also featuring from the bench.
Sergio Ramos, Sami Khedira, Kaka, Benzema and Marcelo started for Madrid, who took the lead two minutes before half-time.
Leicester's club record signing Matt Mills misjudged a long ball allowing Benzema clean through on goal.
The France international then simply laid the ball into the path of the oncoming Callejon who tapped home from 15 yards into an empty net.
It had been an even contest until then, with Benzema forcing Kasper Schmeichel into the only save of the first half at its midway point.
David Nugent fired into the side-netting for Leicester following a long ball over the top from Mills.
Iker Casillas, Cristiano Ronaldo, Mesut Ozil and Xabi Alonso were introduced at the break.
Madrid made it 2-0 just after the hour mark following another defensive mistake.
Marcelo capitalised but his shot struck a post before Benzema netted the rebound.
Dyer pulled a goal back in the 89th minute from a long throw that was flicked on at the near post. The winger clinically volleyed the ball into the bottom corner from 10 yards out.
Leicester open their npower Championship campaign at midlands rivals Coventry in a week's time.
For Madrid, who arrived at the King Power Stadium via Germany following their tour of America, it is on to China to face Guangzhou Evergrande before returning home for the Spanish Super Cup on August 14.