Alhambra-Union had to come from behind, scoring three tries in the last 10 minutes.
University retained top spot going into the playoffs but will rue letting the game slip by not maintaining focus for 80 minutes against a combative home side.
The first half featured a battle between two sides with contrasting styles. University shifted the ball and continually stretched the defence, while Alhambra-Union attacked principally through hard-driving forwards.
University led 17-11 at halftime following tries to Anika Tiplady and Lucy Andersen and some good Tiplady goal-kicking. For Alhambra-Union, fullback Halie Hurring scored a try when she slipped a University tackle and added two penalties.
University quickly added a try after the break with a slick set move from a scrum that left the Alhambra-Union defence bemused and Tiplady crossing on the left flank.
University had the wind and a 22-11 lead and was threatening to run away with the game. But the students let themselves down with some poor execution, and lost Tiplady and classy loose forward Leyhana van Vugt to injuries.
Alhambra-Union dominated the final quarter, with Paige Church, Kerry Stoddart and Megan Kane driving hard in the pack.
Hurring, the talented Black Fern, scored her second try, and a series of forward drives resulted in a try to prop Pip Love.
With two minutes to play, another surging run by Church saw the Alhambra-Union backs move the ball wide for centre Rachel Scott to score. Hurring added the conversion.
Other Alhambra-Union players to impress were halfback Deirdre Roberts and experienced first five-eighth Cathy Charles.
The best of the University backs was centre Lucy Andersen, who was a handful on attack and seemingly everywhere on defence.
Pirates thumped Southern 79-5, and Invercargill side Blues beat Kaikorai 34-10.
In the semifinals, University will play Blues, and Pirates will play Alhambra-Union.
