Aleksander Isak struck in the first half after Miguel Almiron’s effort had been pushed to the striker’s feet.
Newcastle then defended with everything they had to keep out PSG and Nick Pope made a superb save from close range to deny first Bradley Barcola and then Kylian Mbappe, who drove the rebound just wide.
But the visitors’ resolve was broken deep in stoppage time when the visitors were awarded a penalty when Tino Livramento was adjudged to have handled the ball, and Mbappe made no mistake from the spot.
The result means Newcastle are third in Group F, two points behind second-placed PSG.
Eddie Howe’s side now need to beat AC Milan in their final group game and hope already qualified Borussia Dortmund get a result against PSG.
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Controversial penalty breaks Newcastle’s hearts
The finish to this game will have been devastating for Newcastle after they had put in a brilliant display of fight and bravery to keep out the hosts for 97 minutes.
Eddie Howe’s side had arrived in Paris impacted by a lengthy injury list as they named two goalkeepers on their bench alongside four teenagers.
But those who played gave everything and more as they came within seconds of another huge result on their Champions League return.
They rode their luck at times, with Mbappe and Barcola both missing some big opportunities, and it looked like it was going to be Newcastle’s night.
But in the last minute of eight added on in stoppage time, Ousmane Dembele’s cross struck the chest of Livramento – who had been excellent throughout – and the ball bounced up onto his arm.
The incident was checked by the video assistant referee and referee Szymon Marciniak then consulted the pitchside monitor before awarding the spot-kick, which Mbappe thumped past Pope.
The decision seemed harsh on Newcastle and the result means progress to the last 16 is now not in their hands.