Booed by their own fans after their seventh scoreless first half of the season, the Knights came back to life after falling 16-0 down at McDonald Jones Stadium.
Dane Gagai turned back the clock, Fletcher Sharpe and Kai Pearce Paul were immense and Kalyn Ponga claimed the match-winner early in extra time.
The hosts' revival came despite Newcastle having the worst attack in the competition, and showing no signs of turning that around in the opening 40 minutes.
Knights great Andrew Johns labelled it "hard to watch" in the Nine Network's commentary, as Newcastle coughed up error after error and looked out of the contest.
But the match swung dramatically early in the second half, as the Knights began to shift the ball more and caught Manly out on their makeshift edges.
With Lehi Hopoate concussed early and Tommy Talau also spending time off for a HIA, Newcastle got at a Sea Eagles side that had second-rowers Ben Trbojevic and Corey Waddell in the centres.
The home side went from 16-0 down to 16-16 in the space of 18 second-half minutes, with two of the tries coming from long distance and another a Jack Cogger bomb.
Manly appeared to have control of the game back when Clayton Faulalo burst through the middle of the field and fellow winger Tommy Talau crossed next play.
But Newcastle levelled the scores with five minutes to play when Pearce Paul found space on the right edge and Sharpe had his second.
Ponga then had the match winner in the Knights' first set of golden point when he put up a bomb, Fletcher Hunt batted it back and the Knights No.1 followed the play to score.
The win will at least alleviate pressure on under-fire coach Adam O'Brien, after his side had dropped eight of their past 10 games.
Manly had earlier looked like they were going to cruise home in the first half, with their forwards dominating and makeshift fullback Tolu Koula causing havoc.
Haumole Olakau'atu was again powerful in the first half, brushing off three defenders to score one try on the play after Koula had beaten five.
Toff Sipley also scored through the middle after Koula had Manly's first, with Newcastle's forward pack weakened by a concussion to Tyson Frizell.
But after the second-half collapse, the Sea Eagles' halves missed a chance to win the match in the final minute of regulation time.
With Daly Cherry-Evans set up for the field-goal shot, Newcastle's kick pressure prompted him to pass off to Luke Brooks who sent his effort wide from 40 metres out.
A Cherry-Evans field goal would have been something of a statement, with questions still surrounding his spot in Queensland's team for State of Origin II.
But instead it was kick pressure from Ponga on Brooks that proved the difference, before the Knights star's winning play.
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