The Sunwolves posted their first ever win in Australia after winger Semisi Masirewa scored three tries and former Otago and Highlanders first five Hayden Parker, in his 50th match, maintained a perfect goalkicking record for the season - 27 from 27.
They lost to the Waratahs by one point in Tokyo this season but turned the tables in Newcastle, holding onto a two-point lead for 16 minutes to upset the Australian conference leaders.
Super Rugby organizers SANZAAR have ruled the Sunwolves will be dumped from the tournament after 2020. But that decision seemed untimely as the Sunwolves improved on a season in which they have also claimed their first win in New Zealand.
"It's been a tough couple of weeks on the field and off," Sunwolves captain Dan Pryor said. "But the boys have put it behind them and they put in a performance tonight.
"They just dug deep. I asked in every huddle, 'Just keep working, keep working,' and they did."
The Waratahs shocked the Sunwolves with a try after 90 seconds and led 12-3 before the Sunwolves rallied with tries to Masirewa and Grant Hattingh to led 17-12 at halftime. They led at halftime in their previous two matches against Australian teams before losing but avoided that fate on Friday.
The Waratahs went ahead with a try to Michael Hooper after two minutes of the second half but Masirewa struck twice within two minutes to give the Sunwolves a lead they were able to defend.
A week after beating the defending champion Crusaders, the Waratahs suffered a stinging defeat.
"Crashed back to earth there," Hooper said.
Earlier, the Crusaders bounced back from their loss to the Waratahs with a commanding 32-8 win over the Wellington-based Hurricanes.