City slipped to a 1-0 defeat in front of the SKY TV camera's with Gary Cahill bagging a first half header for the visitors.
Tony Pulis' side dominated the majority of the match but couldn't find the killer touch to pick up at least a point.
Despite the defeat the Potters are still just two points adrift of sixth place.
Liam Lawrence's suspension paved the way for Mamady Sidibe to return, and he replaced Richard Cresswell up front, who slotted back in to midfield.
Stephen Wright also returned to the starting line up at the expense of Fulham loanee Gabriel Zakuani, while Demar Phillips was named amongst the substitutes.
Former Potter Lee Hendrie failed a late fitness test and missed the chance to line up against his former team-mates.
City started the match brightly with Ricardo Fuller powering a header straight at Ian Bennett from John Eustace's whipped in cross.
A trademark Rory Delap throw-in caused havoc in the United 6-yard box, and Sidibe was unlucky not to turn the ball home.
Two minutes later, Delap launched another ball in to the box and Bennett had to be alert to parry Andy Wilkinson's 18-yard header over the bar.
The Potters continued to dominate the early stages of the game, but long range strikes from Eustace and Delap failed to hit the target.
Jamaican international Fuller went closest for City in the 20th minute after curling a speculative 20-yard effort inches over the bar.
The visitors mustered their first assault on the City rearguard after 25 minutes, but Wilkinson timed his run perfectly to clear the ball away from the fast approaching James Beattie.
Bryan Robson's side should have taken the lead just before half time, but after Danny Webber burst down the right wing, David Carney smashed his shot at the outside of the post with Steve Simonsen beaten.
However a minute later Cahill made no mistake and put the visitors 1-0 up.
The on loan Aston Villa man met Webber's cross with aplomb, and despite Simonsen's and Pugh's attempts the ball dropped just behind the line.
Just minutes in to the second half a stroke of luck almost saw City level the scoreline.
Fuller neatly controlled and turned before firing the ball which took a wicked deflection, but Bennett managed to scramble across the goal and stop the ball on the line.
Jon Parkin came on to replace Sidibe in the 66th minute, and he wasted no time in getting straight in to action.
A clever turn and an exquisite through ball found Fuller, but an outstretched defender flicked the ball away just as he was about to shoot.
Demar Phillips came on for his debut in the 77th minute, replacing Stephen Wright.
Sheffield were forced to defend gallantly in the final stages as City pushed for a deserved equaliser.
Phillips was full of running and immediately won the hearts of the City faithful; and it was his bursting run which almost led to a late goal.
Leon Cort flicked the ball on to Richard Cresswell, but he headed straight at Bennett from 6-yards.
Shawcross almost won City a point in the final minute, but Bennett produced an outstanding save to palm the ball over the bar.
CITY (4-4-2): Simonsen, Wright (Phillips 78), Cort, Shawcross, Wilkinson (Pericard 89); Cresswell, Delap, Eustace (C), Pugh; Sidibe (Parkin 66), Fuller. Subs: Hoult, Zakuani
UNITED (4-4-2): Bennett; Bardsley, Kilgallon, Cahill, Naysmith (C); Gillespie, Montgomery, Carney (Tonge 90), Armstrong; Beattie, Webber (Lucketti 88). Subs: Stead, A. Quinn, Shelton.
