The Socceroos must now attempt to better North Korea's superior goal difference in their final two matches against Guam and Tawian and hope Hong Kong don't let the Koreans add too many more to their tally when they meet on Friday.
Archie Thompson put Australia in front on the fifth minute but North Korea replied with a goal from J-League star An Yong Hak in the second half.
Coach Holger Osieck made only one change in the line-up that played hosts Hong Kong, handing Central Coast Mariners goalkeeper Matt Ryan his maiden cap in place of Eugene Galekovic.
The first chance of the match came just four minutes in when Thompson got on the end of a Brett Emerton ball into the box, forcing a save from North Korea 'keeper Ri Myong Guk.
But the gloveman was beaten a minute later when a powerful header by Thompson ricocheted off the post and into the net to give Australia the early lead.
The Koreans had a strike of their own moments later with Ryan having to make his first save at international level after a shot from striker Pak Nam Choi - one of five members of the Korean squad who was part of the World Cup side in 2010.
Veterans Emerton and Thompson combined again to create another chance in the 33rd minute, but Thompson couldn't get a clean connection and sent his header wide.
Ryan was put to work again just before the break saving two powerful strikes within a few minutes of each other from Pak Song Choi.
North Korea looked to equalise early in the second stanza with Pak Nam Choi attempting a strike.
Aziz Behich made a great run forward to set Thompson up for a goal but the Melbourne Victory striker misfired.
The chances kept coming for North Korea and it was An Yong Hak who eventually levelled in the 65th minute.
Osieck reacted by sending on teen playmaker Tomas Rogic a minute later for Richard Garcia.
He then substituted Newcastle's Adam Taggart for Thompson with less than 15 minutes to go in an effort to inject pace up front.
Rogic had a chance to put Australia in front in the dying minutes forcing a save from North Korea's Ri Myong Guk.
Emerton, who scored the winner in their opening clash against Hong Kong, could have been the saviour again moments later but sent his shot over the crossbar.
Matt McKay got in on the action with a minute left on the clock but misfired.