Milan won the derby 3-0 thanks to a goal after 44 seconds and a 62nd minute header from Alexandre Pato and Antonio Cassano's late penalty, meaning they stretched their lead at the top over Inter to five points with seven games left.
Inter's six-year stranglehold on the Serie A title is on the verge of ending and for all of Leonardo's boundless enthusiasm, the fact he has only been a manager for under two seasons was abundantly apparent at a rocking San Siro.
"I don't believe we have surrendered but five points are five points, it's a lot," the Brazilian told Sky television.
"The game swung on the goal in the first minute which hit us psychologically. If we had managed to equalise before the break it would have been a different game."
Jose Mourinho, who led Inter to an unprecedented Italian treble last season before quitting for Real Madrid, would not have allowed his side to have been overrun in midfield and on the counter-attack like Leonardo's outfit on Saturday.
Inter owner Massimo Moratti risked the wrath of his fans by recruiting former arch-enemy Leonardo to replace flop Rafa Benitez in December but the Brazilian's wit and intelligence in his season with Milan, who he led to third place, had impressed many observers even if tactics were never his strong point.
The derby was crying out for in-form Samuel Eto'o to terrorise Milan's ageing defence but instead the Cameroon striker was stranded on the left wing and, apart from one glaring miss which could have made it 1-1, barely had a kick.
"Pato did well, it was one of his best games if not the best. The team showed calmness and played good football, the win was more than deserved," Milan coach Massimiliano Allegri said after picking a more cautious lineup than Leonardo.
"It's too early to say it was the scudetto-clinching match."
