Phillips, 35, who scored 22 goals last season to help West Bromwich Albion win promotion last season, pounced in the second minute of injury time to earn Birmingham a hard earned win.
Garry O'Connor flicked on a long clearance from goalkeeper Maik Taylor, before Phillips drilled a low shot past Paddy Kenny at his near post.
It was a rare moment of class in an otherwise disappointing game between two of the Championship's big hitters.
The defeat was rough on United, who weathered a promising early start from promotion favourites Birmingham to take charge of the first half.
But they lacked a real cutting edge in attack despite the best efforts of the hard-working Billy Sharp.
United will be disappointed not to have taken a lead into half-time as they looked the most threatening side, but they were unable to find a way past goalkeeper Taylor.
The Northern Ireland international tipped a 25-yard drive from Gary Speed over the bar in the 12th minute and then denied Sharp with another smart save at his near post 10 minutes later.
In contrast, Birmingham struggled to test Kenny and it was only in the final minute of the opening period when they posed a threat of their own.
Striker Marcus Bent, making his debut after his £1million move from Charlton, was picked out at the far post by a Sebastian Larsson corner, only to see his goalbound drive blocked by Matt Kilgallon.
United also carried their own threat from set-pieces and were unfortunate not to break the deadlock 11 minutes into the second half.
Michael Tonge's left-wing corner picked out Speed on the edge of the area, but the former Wales international was unable to get his header on target and it whistled just wide of the post.
James McFadden should really have given Birmingham a 74th minute lead when he blazed over from 12 yards, but his blushes were spared by the predatory Phillips, who gave Birmingham the perfect start to their bid to make an instant return to the Premier League.