The Fijian side pushed out to a 2-0 lead with goals to Benjamin Totori in the 21st and Cory Chettleburgh eleven minutes later.
Madang fired back minutes before the break through midfielder Maskulan Pulung.
However, Lautoka secured the win in late in the second half when Brian Kaltack found the back of the nets to register the first win in Pool C.
Next up for Madang FC will be the defending champions Auckland City FC. This match is scheduled for next Wednesday, February 28 at 4pm (1pm PNG time).
Photo credit: David Joseph / www.phototek.nz