Niclas Fullkrug scored for the hosts midway through the first half, and Julian Brandt added a second late on as the Germans completed a Group F double over their English opponents.
Newcastle’s greatest chance came just after the break, when Joelinton nodded Tino Livramento’s cross wide from five yards out.
The Brazil international’s shot was a rare clear sight at goal for Newcastle, with Edin Terzic’s Dortmund side dominating the first half.
Despite the visitors’ much superior second-half performance, the hosts had the better chances.
“We weren’t at our best today,” Newcastle boss Eddie Howe explained. “Our normal intensity and quality were missing.”
“We still had our chances, and Joelinton’s header was probably the game’s turning point from our perspective.” If it came in again, he’d bet on himself to score.”
After the interval, the game was also briefly halted as fake golden bars and other objects were thrown onto the pitch from the ‘Yellow Wall’ as part of a protest against Uefa’s proposed Champions League reforms, with one banner reading “You don’t care about the sport – all you care about is money.”
Newcastle’s return to Europe’s elite competition began with a stalemate away at AC Milan, followed by a thrashing of Paris St-Germain on Tyneside.
However, they now face an uphill battle to reach the knockout stages, with Dortmund’s double success over Howe’s side putting them three points ahead of Newcastle, who play PSG in their last group match.
If Newcastle loses in Paris, they will be unable to advance in the tournament following AC Milan’s triumph over the French champions later on Tuesday.