Sydney FC have missed the chance to net a $4 million windfall and the club's first piece of Asian silverware after crashing out of the Asian Champions League Two at the hands of Lion City Sailors.

The Singaporean outfit had taken a 2-0 lead from the semi-final first leg and advanced to the final despite falling to a 1-0 defeat (2-1 win on aggregate) in the second leg at Allianz Stadium on Wednesday.

Sydney scored through Joe Lolley in the 85th minute but his goal came too late as Lion City, who boast former Socceroos defender Bailey Wright, booked their ticket to next month's final where they will play Emirati side Sharjah.

For Sydney this will feel like a major missed opportunity.

The club has never won a trophy in Asia and knocking over Lion City would have given Ufuk Talay's side hosting rights for the final where the winners pocket close to $A4 million in prize money.

"I'm devastated to be honest, I felt like we were going to do it," Lolley said.

"We were probing, we had two disallowed goals in the first half and it felt like something we'd get over the line.

"We probably lost it in the first leg and gave ourselves a lot to do and gave them something to hang on for."

With no away goal rule in force, Sydney entered Wednesday night's clash in front of 10,589 fans knowing all they needed to do was find two goals inside 90 minutes without conceding to send the game to extra time.

Talay's side had the lions' share of possession but were unable to make their dominance count where it mattered, with Jordan Courtney-Perkins and Rhyan Grant having first-half goals chalked off for offside.

Patryk Klimala and Douglas Costa both fluffed at golden chances in the second half while goal machine Adrian Segecic was kept quiet as the Singaporean defence swarmed his every move.

Lolley finally got the Sky Blues on the board with five minutes left, the English winger squeezing a low-driven shot past the reaches of goalkeeper Izwan Mahbud to give Sydney hope.

But as the home side threw everything forward in search of an equaliser Lion City held firm to knock Sydney out at the semi-finals stage.

"It's disappointing, we had most of the ball played it in their half against a defensive side that was waiting for counter attacking moments," Talay said.

"We struggled to break them down and it would have been nice to have the (Courtney-Perkins) first goal count 10 minutes in, that would have changed things.

"We got the goal and kept probing late but I think where we lost it was the first leg, conceding the second goal away from home."