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Arsenal's unbeaten Champions League run in Group H came to an end at Olympiakos after their youngsters were undone by a cool second-half strike by Leonardo.
The Gunners enjoyed much of the possession but Carlos Vela was guilty of wasting two excellent chances.
The hosts livened up after a drab first half, with Leonardo bursting through the defence to slot in the opener.
Lukasz Fabianski denied Leonardo and Kostas Mitroglou while Aaron Ramsey had a late shot cleared off the line.
Olympiakos held on to ensure their progression into the knock-out stages as runners-up.
With Arsenal's top spot assured, boss Arsene Wenger could afford to rest many of his stars, handing a debut to 18-year-old Tom Cruise and partnering reserve-team captain Kyle Bartley with veteran Mikael Silvestre in defence.
The Greek champions needed just a point in Athens to make the final 16, and they began very hesitantly and nervously in front of their noisy supporters.
Arsenal were rarely without the ball in the opening 15 minutes, and fit-again striker Theo Walcott had the first chance but shot straight at keeper Antonis Nikopolidis after linking up well with teenager Jack Wilshere.
Sluggish Olympiakos were restricted to long-range efforts from Luciano Galletti and Dudu thanks largely to Welsh international Ramsey pulling the strings in the absence of rested captain Cesc Fabregas.
The hosts' limp first-half effort was brought to a close rather aptly when defender Raul Bravo blazed a wild volley high and wide.
The second half was a transformation and within five minutes of the re-start Olympiakos were ahead.
Bartley flapped at a tackle on Oscar Gonzalez and the ball fell to Leonardo who strode through on goal and slotted smartly between the legs of Fabianski.
The London side had an immediate chance to level proceedings but Vela's shot was denied by Nikopolidis' legs after a fine square pass from Ramsey.
Walcott had another chance to equalise but his shot was deflected over the bar and then Vela was again wasteful after toe-poking the ball off-target.
As Arsenal's young legs tired, Fabianski had to be at his best to keep out the ball when faced with one-on-ones with Leonardo and Mitroglou.
The youngest team in the Champions League this season remained determined to avoid defeat in Greece and only Leonardo's leg on the line stopped Ramsey from poking in an equaliser in the final two minutes.
Arsenal boss Arsene Wenger:
"I am very proud of the young players, there are a lot of positives. From Barnet to Athens is a big jump, but they did very well.
"Nobody was disappointing, and it is difficult to single out individual performances, although Aaron Ramsey had a good presence, gave good balls and produced a good work-rate."
Olympiakos manager Zico on making the last 16:
"We are pleased for our fans that the team made it. It was a good performance.
"We tried to win the game from the beginning and we played well. Our fans should enjoy this victory and that we qualified."
Source: bbc
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