Adam Clayton and Sean Scannell were on target for Huddersfield as the Terriers booked a date with Premier League Wigan in the fifth round.
Michael Keane replied for Leicester to make it 1-1 but that was a lone bright spot for the home side, and Pearson said: "We were not good enough in both boxes. That is what cost us. We should have avoided giving away the free-kick for the first goal and were then caught on the counter-attack to concede the second."
He added: "We were not clinical enough in their penalty area when we had our chances. We didn't secure the ball well enough but still had opportunities. But we did not look as dangerous as we have been.
"There was a good work ethic but we were let down because the quality in both boxes was not what it has been.
"We are disappointed to be out of the FA Cup but I have got a lot of faith in this group of players. The league has always been our priority but I would still have preferred to go through tonight."
The victory capped a successful day for Huddersfield, who earlier confirmed they had been given permission from Coventry to talk to Mark Robins about their vacant managerial position.
The Terriers made a move for the former Manchester United striker on Monday night as they seek a replacement for the sacked Simon Grayson, but saw that request initially rejected.
The Sky Blues have now given their manager permission to talk to the npower Championship club, meaning Huddersfield's caretaker boss Mark Lillis may not be in his role much longer.
Lillis was nevertheless delighted to keep the club's cup dreams alive, and said: "This was a fantastic evening for the club. The big thing was to get the lads into the dressing room at half-time and make sure they continued to believe in themselves. That was the big word - belief. We are very happy, of course we are. It is a great feeling."
Source: PA
Source: PA