The 33-year-old striker pounced on a spill by Dons goalkeeper Nathan Abbey in the 103rd minute to settle a topsy-turvy five-goal thriller at stadium:mk.
Drewe Broughton opened his Dons account to put the League Two side ahead in the 11th minute when he nipped in ahead of Blades' goalkeeper Paddy Kenny at the near post to convert Jude Stirling's low cross from close range.
Chris Lucketti equalised for Sheffield United just nine minutes later with a towering 12-yard header from Nicky Law's corner that Abbey could only tip into the corner of the net.
Alan Navarro then curled a 22-yard effort inches wide as the Dons dominated the remainder of the first half.
But the Blades upped their game after the break and Law's first professional goal put Bryan Robson's men 2-1 up nine minutes after the re-start.
The 19-year-old winger blasted the rebound into the corner of the net from 10 yards after Jon Stead's shot from Alan Quinn's cross had been saved by Abbey.
Jon-Paul McGovern's 25-yard free-kick took a wicked deflection of the United wall to equalise for the Dons in the 69th minute and send the game into extra-time.
But Horsfield slotted in the winner from close range 13 minutes into the first period of extra-time after Luton Shelton's fizzing 22-yard drive had been spilled by Abbey.