A display substrate and a manufacturing method thereof, and a display panel are provided. The display substrate includes a base substrate, a first electrode, a light-emitting functional layer, and a second electrode. The light-emitting functional layer includes a first functional layer and a second functional layer, an orthographic projection of an edge of the second functional layer on the base substrate is within an orthographic projection of an edge of the first functional layer on the base substrate, and an area of an orthographic projection of the second functional layer on the base substrate is smaller than an area of an orthographic projection of the first functional layer on the base substrate; and the second electrode covers and is in contact with at least one side surface of the light-emitting functional layer and a portion of a surface of the light-emitting functional layer away from the base substrate.