The Tigers were hit by an 80th-minute sucker punch in a game that they had the better of, but were punished for their failure to convert a number of decent chances.
Following on from their shock 1-0 loss to rock-bottom Burton Albion last weekend and Tuesday's goalless draw with League One leaders Lincoln City, Grant McCann's misfiring team are starting to look like outsiders for a top-two finish.
Top of the table just eight days ago, albeit having played a game more than the Imps, City remain in second place despite Saturday's failure, though the three sides behind them are all breathing down their necks, while boasting at least two matches in hand.
Fresh from a 4-1 thrashing of Rochdale last time out, the Dons were quick out of the traps at the KCOM Stadium and it was all too easy for them to get at the home back-four during the opening five minutes.
Zak Jules cut inside off the left and shot straight at Matt Ingram, before the same player sent a free header from a right-wing cross narrowly wide of the mark.
Hull eventually woke up and having finally showed some signs of life, they spurned a great opportunity to take the lead with 10 minutes on the clock.
Josh Magennis expertly flicked on a cross-field pass, sending Keane Lewis-Potter clean through on goal, though the Tigers youngster's first touch was an uncertain one and visiting goalkeeper Andrew Fisher was quickly off his line to smother the ball.
At the other end, Will Grigg showed his predatory instincts to get on the end of Scott Fraser's low cross from the left, stretching to meet the ball at the far post and forcing a stunning reaction save out of Ingram.
Wilks then tried his luck from just inside the Dons' half, sending an audacious long-range strike just the wrong side of the upright having intercepted a scuffed clearance near halfway and spotted Fisher a long way off his line.
With Hull seemingly having clicked into gear, they went on to enjoy a brief spell in the ascendancy courtesy of some neat interplay.
And another chance came and went when a ball into the Milton Keynes penalty area broke for Wilks on the edge of the six-yard box. He initially did extremely well to bring it under control on his chest, but then smashed a wild volley miles over the cross-bar.
That was about that for goalmouth action for then opening period, though City began the second half on the front foot, Crowley seeing an effort blocked in a dangerous area before Greg Docherty's blast from Callum Elder's left-wing pull-back was superbly kept out by Fisher.
The Tigers continued to look the more likely, with Lewis-Potter skinning his marker wide on the left before racing towards the edge of the Dons box and seeing a shot deflected behind for a corner.
Lewis-Potter and Honeyman both saw goal-bound efforts blocked by visiting defenders in the space of a couple of seconds as the home team kept probing away.
The breakthrough would however arrive at the opposite end of the field, and rather against the run of play, after referee Declan Bourne awarded Milton Keynes an 80th-minute penalty for handball.
And, Fraser would make no mistake from 12 yards, calming sending Ingram the wrong way as he slid the ball into the bottom left corner of the goal.
The Tigers did fashion one glorious chance to salvage a point when Honeyman delivered an inviting free-kick from the right flank, though an unmarked Jacob Greaves could only nod overt the cross-bar when he really ought to have done much better.
And when Magennis met Lewis-Potter's stoppage-time cross from the right with a diving header but directed the ball wide of the near post, any hopes of a late reprieve went with it.
Hull City: Ingram; Coyle, Burke, Greaves, Elder; Honeyman, Crowley (Chadwick 64), Docherty; Wilks, Magennis, Lewis-Potter. Unused substitutes: Long, Scott, Flores, McLoughlin, Slater, Clark.
MK Dons: Fisher; O'Hora, Darling, Lewington; Laird (Harvie 81), O'Riley, Surman, Fraser, Jules (Sorinola 67); Mason (Gladwin 81), Grigg. Unused substitutes: Nicholls, Brown, Sorensen, Freeman.
Referee: D Bourne (Notts).