Now on eight points, Otago is still in the hunt for its targeted fourth place in the premiership play-offs.
Four aspiring clubs are separated by just three points with six matches to go.
Otago coach Malcolm Fleming was extremely disappointed at the free kick awarded, which allowed Waikato to square the match.
"A shot hit Tom Connor from about three or four yards, and the referee [Nick Waldron] not only gave a free kick for handball, but flashed a yellow card at Tom, which will keep him out of next week's important match with Hawkes Bay," Fleming said.
A disciplined first-half performance by Otago conceded no early goals, and Fleming's side struck a good balance of steady defence while still creating goal-scoring chances.
After a near-miss by Milos Nikolic, it was Otago that launched penetrating attacks that had Phil Ruggles curl a shot at goal, Ant Hancock force a good save at the near post, and shortly afterwards clip a low shot that forced a good save from keeper John Fletcher.
However, a rash challenge by Otago centreback Tom Sadd had referee Waldron pointing at the penalty spot and Jason Hicks shot Waikato into a 1-0 lead in the 38th minute.
After a fiery halftime team talk, Otago came out with all guns blazing and Harley Rodeka drove over a cross field shot-cross that evened the scores one minute after the break.
Tails up, Otago pressured in attack and combined well to release Phil Ruggles who shot United into a morale boosting 2-1 lead with 35 minutes left.
Wakato retaliated with a rasping shot that keeper Highfield parried away with a top-class stretching save. The big keeper did not have a lot to do, but showed his undoubted class when required.
The controversial 58th minute free kick, yellow card and well-taken goal, right-footed by Nikolic in off the woodwork, gave Highfield no chance, and once again the match was squared.
Otago went close when a Connor cross was headed narrowly wide by Tristan Prattley, Hancock crisply hit an angled drive, and Ruggles showed strength and good technique with a shot that drew applause from home supporters as keeper Fletcher made an arching save.
But despite end-to-end action, there were no more goals.
Fleming was pleased with the performance of his side, particularly in the later stages of the game.
"Our second half was excellent, especially with the team changes that have been forced on us with Nathan Knox leaving and Paul Seaman injured.
"Our new signing Chris Anderson, who is 6ft 2in [1.88m] will be in action next week and should offset the loss of Knox. We now have a string of home ASB matches in Dunedin, starting with Hawkes Bay next Sunday. Our destiny will be decided then."
A midweek evening match against a Phoenix XI at Tahuna Park will allow Fleming a chance to observe some younger Otago talent against top opposition.
