Jason Hayne played his part with a goal in each half to set up the victory and cap off a stunning tournament for the Oceania representatives who bring home $US1.5 million ($NZ2.09 million) in prize money.
Coach Paul Posa emphasised the importance of the result straight after the match.
"We gave a good account of ourselves and played with a lot more belief than against (Mexican champions) Atlante.
"Fifth place is a sensational result for us, the biggest night in the history of Auckland City."
After an upset 2-0 win over hosts Al Ahli and a 0-3 loss to Atlante, Posa's amateur squad were again underdogs going into the fifth place play-off against the Congo's Mazembe at Zayed Sports City.
They set off with purpose from the whistle earning a corner inside the first minute which Ivan Vicelich headed just over the bar.
But it was a decidedly uneventful opening spell until the game was turned on its head in the 24th minute when Mazembe goalkeeper Muteba Kidiaba was shown a red card for handling the ball outside the box as Daniel Koprovcic steamed down on goal.
Substitute goalkeeper Aime Bakula almost made the same mistake five minutes later rushing out to Hayne just outside the area but the midfielder managed to chest the ball away from the oncoming Bakula and calmly side-foot home Auckland's first goal. Defender Sam Campbell almost made it two in the 41st minute with a header that flashed just wide.
The second half saw both sides go on the attack and create numerous chances.
Kilitcho Kasusula scored for Mazembe in the 68th minute after captain Mputu teed him up with a clever back heel inside the box.
Mazembe looked like they could run away with the game but Auckland showed plenty of resolve to hit back in the 72nd minute with Hayne smashing home from four metres into the roof of the net.
Four minutes into stoppage time, substitutes Grant Young and Daniel Morgan combined well down the left to set up van Steedan who slotted the ball home from 3m for a dramatic winner.
Scores: Club World Cup fifth place play-off: Auckland City FC 3 (Jason Hayne 2, Riki van Steeden) TP Mazembe (Congo DR): 2 (Ngandu Kasongo, Kilitcho Kasusula). Halftime: 1-0.
