Shayon Harrison's double and a goal from Luke Amos to start the ball rolling in the first half were enough to secure a deserved victory at the Lamex Stadium.
The result means all four teams in our group - Everton and FC Porto the other two - are level on three points.
Schalke have now completed their fixtures and both ourselves and Everton finish with matches against FC Porto - the Portuguese side travel to Everton on November 22 before facing us at Stevenage on December 23 (12noon KO). The top two progress to the quarter-finals.
Luke McGee was back in goal for only the second time this season and was joined in the starting line-up by debutant Japhet Tanganga, 16, at left-back. Milos Veljkovic wore the captain's armband.
We started well and experienced visiting goalkeeper Christian Wetklo, 35, kept us at bay with a sharp low save from Anthony Georgiou - impressive again down the left - and a point-blank save from Amos from Georgiou's cross on 22 minutes.
However, Wetklo's night would take a turn for the worse, starting on 25 minutes when he failed to hold onto Kenny McEvoy's cross and the alert Amos stooped to head into the empty net for 1-0.
Anton Walkes angled a drive just wide and Veljkovic saw a close-range header hacked off the line by Sercam Gocer moments before the break.
At the other end, McGee was mostly a spectator and only had one attempt to field, a straight-forward save from Gocer's free-kick.
We were in complete control at half-time and the game took an unexpected turn only minutes into the second half when Wetklo, who spent the best part of 10 years in the Bundesliga with Mainz, was sent off for retaliation after taking umbrage to Harrison's challenge as the striker closed him down on the edge of his box. Referee Josh Smith showed the red card and Wetklo wasn't best pleased, to say the least.
Schalke sacrificed Damiel Geissler in midfield to bring on substitute goalkeeper Janik Schilder, who was facing a penalty within minutes after Georgiou was upended by Joseph Boyamba.
Harrison was confidence personified as he drilled home the spot-kick for 2-0, 55 minutes on the clock.
Schilder produced a fine save to keep out Harrison's header on the hour but Schalke found a way back into the game out of nowhere on 65 minutes when Florian Pick fizzed home from 25 yards for 2-1. Maurice Neubauer soon fired just wide from a free-kick and alarm bells were ringing for a few minutes.
Thankfully, it was only a few minutes as Tanganga teased in a perfect cross for Harrison to attack, and the striker did the rest, towering over John Malamga to head into the top corner.
The final chances of note saw McEvoy's cross sliced onto his own crossbar by Max Machtemes and Filip Lesniak twist and turn his way into the box before curling just wide.
Spurs U21s: McGee (Glover, 46), Walker-Peters, Carter-Vickers, Veljkovic (c), Tanganga (Bennetts, 83), Amos (Miller, 72), Lesniak, McEvoy, Walkes, Georgiou, Harrison. Substitutes (not used): Maghoma, Stylianides.
FC Schalke 04 U21s: Wetklo, Neubauer, Ozturk (c), Uphoff, Gocer, Pick, Geissler (Schilder, 48), Lohmar, Gasilin (Pamadic, 81), Malamga, Boyamba (Machtemes, 57). Substitutes (not used): Michels, Koseler.