Goncalo Ramos gave Benfica the lead after 15 minutes as he headed the ball in from Joao Mario’s corner.
But the advantage didn’t last long as Miguel Almiron started and finished a fine attacking move to turn the ball in from Kieran Trippier’s cross.
Benfica restored their advantage as Alex Grimaldo curled a 25-yard free-kick into the top right corner of the goal.
But Trippier and Almiron combined again as the Paraguayan levelled the score at 2-2 going in at half-time.
Newcastle finished the match with 10 men after Joelinton was shown a second yellow card with nine minutes remaining.
Benfica made their man advantage count in the final minute of normal time as Henrique Araújo stroked home to make it 3-2.
13. Emil Krafth - 6
On for Trippier 46: Got into some decent areas going forward but didn’t do much with the ball. Photo: Ian MacNicol
14. Fabian Schar - 7
On for Lascelles 46: Was rarely troubled at the back following his introduction. Photo: Gareth Copley
15. Dan Burn - 6
On for Botman: Kept Benfica relatively quiet in the second half but was beaten for pace for the winning goal. Booked. Photo: Mike Hewitt
16. Matty Bondswell - 7
On for Targett 46: A mature and composed first-team outing for the 20-year-old left-back. Held his own against a top European side. Photo: Robbie Jay Barratt - AMA