Hakan Calhanoglu scored the winner in first-half injury time to condemn Barca to their second European defeat of the campaign. The Blaugrana now lie three points behind second-placed Inter and six points from group leaders Bayern Munich.
The visitors thought they had equalized midway through the second half at the San Siro when Pedri converted at the back post from an Ousmane Dembele cross. But VAR disallowed the goal as Ansu Fati handled the ball in the buildup.
Barcelona were then left furious with the officials when Denzel Dumfries appeared to handle the ball in the penalty area in the 91st minute. Following a lengthy VAR review, the referee waved away Barca's protests and the Catalan giants failed to find a way to equalize.
Despite well-publicized financial difficulties, Barcelona spent plenty of money in the summer on players like Robert Lewandowski, Raphinha and Jules Kounde. This has left plenty of supporters unhappy with how the club have conducted themselves, with rival fans reveling in their latest defeat:
Xavi blames "massive injustice" for Barcelona's Champions League defeat against Inter Milan
The Barcelona manager was booked for protesting his team's disallowed goal, which he felt was perfectly legitimate. Xavi was also clearly unimpressed with the decision not to award his side a penalty late in the game.
As per Barca Universal, Xavi said:
"To be honest, I can't hide anymore. This is a massive injustice. Referees are extremely important in this sport, and he needs to come out and explain himself, because this is unbelievable."
Xavi further added:
"The referee left and said nothing. I'm outraged. We don't understand. That is the word, outraged."
But the legendary midfielder also conceded that his team's first-half display was well below par, as he stated:
"In the first half we lacked too much rhythm. We have to criticize ourselves, beyond the referee's calls."
Barca now face Inter next week in the return leg at Camp Nou, knowing they must win if they are to have a realistic chance of progressing to the next stage. Their prospects won't be helped by Andreas Christensen's injury, as he limped off during the game with an ankle injury.