Former Sheffield United striker Gareth Taylor headed in a 74th minute winner to dent the Blades' hopes of a top-six finish.
Joe Kinnear's improved Forest side had taken a first-half lead through Marlon King, with Alan Wright hitting back with a deflected free-kick before the big Welshman struck.
United, whose push for the play-offs suffered a set back with a 2-1 defeat at Cardiff last week, almost found a way through in the 11th minute. Full-back Simon Francis lashed in a low cross from the right, the ball hitting Andy Reid and slicing into the side netting with visiting keeper Paul Gerrard stranded.
Midfielder Peter Ndlovu squandered a chance minutes later, rising to meet a Michael Tonge cross but finishing with a tame header scooped up by Gerrard.
Jack Lester weaved his way into the area, his low drive snatched on the line by the Forest keeper before United were sliced open in the 25th minute.
Midfielder Andrew Impey drilled in a fierce strike, the ball cannoned off defender Phil Jagielka to the waiting King who finished clinically, tucking his right foot shot from 15 yards into the far corner.
Francis was inches away from an equaliser with a glancing header after connecting with a Wright free-kick.
Mathieu Louis-Jean scooped the ball away for a corner with Lester waiting to pounce at the far post and Wright saw his free-kick deflected inches over the top as United turned the screw.
The breakthrough came in the 59th minute, Wright's free kick from 22 yards taking a deflection to spin into the far corner.
Tonge cleared a Wes Morgan header off the line before Forest hit back in the 74th minute, Taylor rising to meet Reid's corner as Tonge tried in vain to clear.