Veteran midfielder Gavin Johnson bagged two first-half goals but City's own evergreen striker Dean Windass ruined his day with a late equaliser.
The 34-year-old former Premiership player headed the visitors in front early on and then cracked home a second six minutes before the break.
But Windass had the final say when he fired home his 11th of the season with only eight minutes to go.
City, who had won their previous four home games in the league, had hoped to bounce back from their 4-0 drubbing at leaders Luton last weekend, but injuries and suspension hampered their cause.
League One manager of the month Colin Todd handed a debut to 20-year-old midfielder John Swift but the Bradford youngster had hardly had a touch before Johnson opened the scoring.
Joe Keith's right wing corner should have been meat and drink to the City defence, but Johnson was given a free run at the cross and from six yards out he powered his header passed the keeper.
Colchester's teenage stopper Dean Gerken twice denied City skipper David Wetherall with smart saves and the visitors came close to doubling their eighth minute lead after some classy play by dangerman Craig Fagan.
The talented striker turned superbly in the City box after 15 minutes but his dipping volley struck the far post and amazingly bounced away to safety.
City finally got the break they were looking for after 23 minutes when a long clearance upfield skimmed off a Colchester head into the path of top marksman Windass.
The experienced frontman kept his cool despite the tight angle and calmly slid a left-foot shot passed Gerken from six yards.
U's skipper Wayne Brown saw his fierce volley well saved by Paul Henderson from another Keith corner, but Fagan's determination paid dividends when he battled his way passed full-back Darren Holloway to set up Johnson for his second.
Johnson timed his run into the box perfectly and lashed home Fagan's cut-back with a crisp left-foot shot from 16-yards.
City showed more intent after the break and winger Ben Muirhead saw his fizzing drive fly inches over the bar.
Gerken then made another good save to keep out a Lee Crooks' strike, but he had no chance with Windass' match-saver.
Crooks' quick pass into the U's box caught their defenders flat-footed and Windass turned sharply before drilling a low right-foot strike home from 12 yards.
In a furious finale Keith was booked for protesting after his penalty appeal was waved away and Gerken capped a fine display by pushing away late strike from Muirhead.