A goal in the first half just six minutes in, a header at the back post from Raja's striker Christian Ighadaro, settled the contest with the away side now in the driving seat for the second leg.
Chiefs found it difficult to break Raja down, with one glaring chance in the 86th minute when Siphelele Mthembu should have done better.
MATCH REPORT: Chiefs fall at home to Raja
However, Baxter is adamant that the game is not over yet but was disappointed with the way his side defended.
"Obviously I'm not pleased with the result; but quite pleased with a performance from the players," Baxter said.
"We gave away a very silly goal in the critical phases of the game and our centre-backs switched off and their biggest player on the field left him unmarked. After that I thought we played very well and we dominated possession in the half without really penetrating.
"In the second half we changed a couple of things and with the movement, I thought we were better.
"We have a tough game away now and I certainly don't think the tie is over."
Itumeleng Khune was again left out in this game with Brilliant Khuzwayo restored in goal, and Baxter defended his decision, saying it was part of his rotation plan especially as games are coming thick and fast.
"The fact that he [Khune] has been out injured; he came back and he has had some games under his belt. We have a rotation policy and we have three good goalkeepers," he said.
"In the cup competitions we choose to play all the goalkeepers, so it was part of the rotation plan and also Khune has played the last games so we don't want to break him down again."
Chiefs have a massive task away in Morocco and if they lose in the first round of the knockout stages, it will be the second time as they faltered last season against Ivorian side AS Vita Club.
The return leg in Morocco will be played on April 4.