The Shrimps made it six wins from seven games despite playing most of the second half with 10 men after David Artell was sent off for a stamp on Chris Whelpdale.
The Posh were 2-0 up after just 11 minutes and looking comfortable, with goals from Craig Morgan and Charlie Lee both coming from Jamie Day corners.
George Boyd came close to extending the lead with two efforts that sailed wide and he volleyed over from close range when he perhaps should have scored.
At the other end Morecambe, who came into the game with five wins in six games, also looked sharp going forward in an extremely open game.
Matty Blinkhorn went close with two shots of his own after Gary Thompson had forced Mark Tyler into an excellent early save, tipping over a viciously dipping volley.
Morecambe were finally rewarded for their forward play with a goal for defender Artell on 26 minutes as he headed home Craig Stanley's excellent free kick.
It proved to be a mixed afternoon for Artell however as he saw red on 48 minutes after an alleged stamp but it was a decision that proved to be the turning point of the game.
It seemed to give Morecambe a real lift and they went on to enjoy a period of dominance despite being a man down.
Their efforts bore fruit when Carl Baker headed home a curling Michael Twiss corner to level on 52 minutes before the Shrimps sealed a memorable three points 20 minutes from time with a controversial penalty.
Left back Jamie Day was adjudged to have handled Thompson's cross and Baker stepped up to calmly slot home the spot kick.
Posh hit back with Whelpdale, Adam Newton and Jeff Hughes all firing over the bar from distance before Whelpdale hit the post with a header from six yards out.
Morecambe also hit the woodwork through Craig Stanley before Joe Lewis, making his final loan appearance before returning to Norwich, made two superb late saves to give Sammy McIlroy's League two newcomers another valuable three points.