Shaun Wright-Phillips' stoppage-time equaliser earned Manchester City another point in their battle for Premiership survival.
But the midfield player's last-gasp strike denied bottom club Wolves their first away win of the season and dealt what could be a fatal blow to their hopes of staying up.
It was cruel on Dave Jones' side that had established a two-goal lead and then reclaimed an advantage through a late goal from Henri Camara after City had pulled back to 2-2.
Wolves, who also missed a second-half penalty, ought to have triumphed on the balance of play against a City side that still has won only three home league games this season.
Jones lamented: "When you score three goals away you should go on and win, and we should have taken maximum points.
"It is something you have to swallow, but it is not easy for me.
"Three points would have dragged them closer, but a draw is no good for anyone." Jones added that football is cruel but you have to learn from your mistakes.
He accused his side of trying to play football too near their goal and conceding a 'silly' free-kick for City's late equaliser.
Jones, who said he could not fault the commitment and endeavour of his players, added: "To kick the ball 60 or 70 yards from goal is not an offence.
"It may be an ugly ball but I have never known anyone to score from 60 or 70 yards." Jones' main disappointment was his side's inability to defend explaining that they just cannot keep a clean sheet.
Arthur Cox, again deputising for the unwell Kevin Keegan, admitted his side were in a battle to avoid relegation.
He said: "The majority of our players are used to winning and being associated with successful sides.
"And that 'clear your lines at all costs, challenge at all costs' is not in some of their mentalities.
"I sensed a nervousness amongst our players in the dressing-room for the first time because of our league position, and we have to respond to that.
"We said all along there are six or seven of us at the bottom and we need to finish at the top of that mini-league." Wolves almost snatched a seventh minute lead with a move set up by City old-boy Mark Kennedy.
He released Shaun Newton whose shot was deflected and acrobatically kept out by goalkeeper David James.
The rebound fell invitingly for Camara six yards out, but he headed over the crossbar.
City's first clear-cut chance came when Steve McManaman and Robbie Fowler linked superbly but goalkeeper Paul Jones made a superb block to deny Fowler.
City were stunned when Wolves took a 13th minute lead. Camara's corner was poorly cleared by Michael Tarnat and Kennedy rifled home an unstoppable left -oot shot into the top corner from outside the penalty area.
It was only Kennedy's second goal of the season and this was the first time he had played against City since his move to Molineux.
It got worse for City who went two down in the 23rd minute when Tarnat failed miserably to clear Lee Naylor's cross enabling Camara to set up Carl Cort to fire past James.
City rallied and within a minute had halved their deficit. Tarnat, at fault for both Wolves' goals, made some amends by providing a left-wing cross for Nicolas Anelka to head home his 21st goal of the season from six yards, an effort which flew in off the upright.
And City might have levelled when Fowler rounded Naylor only to shoot into the side-netting from an acute angle.
Wolves almost restored their two-goal lead when Camara flipped the ball over the head of Richard Dunne and poked the ball past the advancing James only for it to hit the outside of the post.
City were back on level terms in the 39th minute when Antoine Sibierski rose to head home Tarnat's free-kick from six yards out, directing his effort wide of Jones.
Wolves almost went back ahead moments later when Cort rose to meet Newton's right-wing cross only for Sun Jihai to deflect his header for a corner.
The start to the second half, unsurprisingly, failed to match the opening period in terms of goalmouth incident and excitement and neither goalkeeper was called into action for the opening 14 minutes.
City ought to have taken the lead shortly before the hour when Fowler beat the Wolves offside trap running onto McManaman's throughball, but he shot disappointingly over.
Cort then thought he had put Wolves back in front with a header which was destined for the top corner, only for James to pull off a wonder save which left the Wolves striker in a state of disbelief.
There was further drama when Wolves were awarded a 63rd minute penalty when Dunne was adjudged to have dragged back Camara as he burst through into the penalty area.
James showed why he is England's number one making a splendid save low to his right to keep out Colin Cameron's spot-kick.
City came agonisingly close to taking the lead when Wright-Phillips and Sibierski linked well on the right to set up Anelka whose near-post shot flew inches wide of the upright.
But it was Wolves who took the lead in the 78th minute after a foul by substitute Joey Barton on Paul Ince just outside the penalty area.
Kennedy's free-kick was well-saved by James low to his right but Camara, following up, slotted in the rebound from a tight angle.
City almost equalised moments later, when Tarnat's fiercely-struck free-kick was brilliantly turned away by Jones low to his right.
And there were also chances for Sibierski and substitute Paulo Wanchope who both had three headers but could only direct them straight at Jones.
But there was still one final twist as City snatched a point with a leveller in the third and final minute of stoppage time.
Tarnat's free-kick was headed out by Kennedy, but only as far as Wright-Phillips, who struck a drive from outside the penalty area low to the right of Jones.
It sent the few City fans remaining in the ground home happy though they were painfully aware that their side was lucky to escape with a point.
MAN OF THE MATCH: Henri Camara – His electrifying pace was a constant threat to the City defence.