Winger George Boyd grabbed the winner for Peterborough as Roy Keane's poor start to the season continued at London Road.
Keane's Ipswich side took the lead in the Carling Cup second-round tie through new signing Tamas Priskin but the £1.7million striker then missed a penalty.
Lee Frecklington crashed Darren Ferguson's side level with a fine goal before Boyd ensured that Keane is still looking for his first win of the season.
Both managers played under Sir Alex Ferguson at Old Trafford and the Manchester United manager was in the stands to cast an eye on his former midfielders.
And it was Ferguson's son who got the better of his former captain after a dominant second-half display during which Ipswich were dreadful.
Keane had stated on Monday that several players had played their last game for Ipswich and the absence of Jon Stead and Owen Garvan from the matchday 18 suggested that the pair may be on their way from Portman Road.
A few more may be joining them after this match but one man who did return to the side was Pablo Counago.
Counago was making his first appearance of the season after a groin problem and crafted the opening goal in the 14th minute.
The Spaniard pulled well into space on the right flank and after his first cross was blocked he sent a second ball into the near post where Priskin was able to poke the ball past Joe Lewis from close range.
An Ipswich free-kick then led to a golden chance to double the lead in the 25th minute.
Posh allowed the ball to bounce and Priskin was felled by Gabriel Zakuani as he nipped in for a stonewall penalty which was awarded by the linesman.
Priskin's spot-kick had plenty of power behind it but lacked direction and Lewis was able to palm the ball to safety.
It was a let-off for the home side and they hit back through a stunner from Frecklington in the 32nd minute.
The former Lincoln midfielder received the ball with his back to goal and after spinning away from his marker, took a touch before smashing a 25-yard strike into the top corner which kissed the underside of the crossbar on its way into the net.
Priskin and Counago were replaced by Jon Walters and teenager Connor Wickham after the break as Keane's side looked for a second but instead the home side scored in the 64th minute.
Toumani Diagouraga won the ball 30 yards from goal with a crunching tackle and the ball span out to Boyd on the left wing.
He skipped around a flimsy challenge by David Wright and crashed a low shot through Richard Wright at his near post.
The goalkeeper could have done better with the goal but produced a stunning save minutes later to turn Aaron Mclean's powerful strike away from close range.
Wickham went close with a speculative effort in the dying minutes but Lewis remained untroubled as Peterborough held on.