A stunning long-range shot by full-back David Alvarez in stoppage-time sent Equatorial Guinea to top spot in Group A and the small country into delirious celebration.
Iban Iyanga, better known by his footballing name Randy, headed home the first goal of the game just after the hour mark to set up the win but home hopes seemed dashed when Senegal equalised in the 89th minute through Moussa Sow.
Alvarez then hit a spectacular drive from outside the penalty box to win the match and ensure one of Africa's smallest countries will play in next week's quarter-finals.
Big guns Senegal, after a surprise loss to Zambia on the opening day, are out.
Spurred on by some 30,000 red-clad spectators who screamed and cheered almost every move by their team, Equatorial Guinea held out against a Senegal lineup full of players from European clubs.
Ranked 108 places below Senegal, Equatorial Guinea's controversially-assembled side - all born outside the country - fought for every ball on a rain-soddened pitch.
The hosts had few chances but also ensured a frustrating evening for Senegal, who threw everything forward in the last quarter-hour before Sow equalised.
Senegal striker Demba Ba had three good opportunities in a 12-minute spell in the first half but missed them all. A stinging shot from Guirane Ndaw was also well-saved by Equatorial Guinea's Brazil-born goalkeeper Danilo.
In the second half Mamadou Niang also produced chances for Senegal but the home defence held tight until Sow netted from close range.
Senegal had been the strongest-looking team in the qualifiers, emerging from a tough group ahead of former winners Cameroon and the Democratic Republic of Congo, but now go home victims of the most unlikely result.
