The Highlanders were awful throughout the match but managed to score 31 points in the second half to grab what seemed like an unlikely draw.
The score was tied up 31-31 but Phil Burleigh did not kick the ball out with less than 10 seconds left and the Reds swept down the field to score the winning try through Jake Schatz.
The visiting team was well behind at the break, down 21-0 and looked no chance of getting anything from the game, so poor was its performance in the first half.
But it kept seeking to move the ball and eventually it paid dividends.
Patrick Osborne sprinted 70m to get his side within seven points with five minutes left.
Then Fumiaki Tanaka scored a try with one minute left as the Reds ran out of gas.
Hayden Parker calmly slotted the conversion to look like grabbing an unlikely draw for his team, but the Reds did not quit.
The Highlanders put together easily their worst effort of 2014.
They could have given themselves a real boost and planted themselves in the top six with a win, but they put on a performance which came right out of the bottom drawer.
The visiting side had its poorest 40 minutes of the season - actually make that five years - and the match appeared all but over at the break.
The men in green came out with an attacking intent but the side's ball security and patience was poor.
It is hard to believe it was the same team which had been in playoff contention all season.
The Reds were keen to score points and the ball was getting plenty of air in the opening half, but the home side should have been ahead by more at the break, such was the incompetence of the Highlanders.
The home team had a mortgage on lineout ball no matter who was throwing in and the Highlanders' set piece was in pieces by the break. The Highlanders scrum faded the longer the game went on.
The visitors suffered a setback after just 10 minutes when prop Ma'afu Fia left the field with a blow to the head and he did not return. He also injured an elbow.
Lock Joe Wheeler also left the field in the first half.
The Reds scored the first try shortly after Fia left the field when loose forward Curtis Browning drove over after the home side attacked the line.
The longer the first half went on the uglier it got from the Highlanders. The side treated the ball with utter contempt and its lineout was functioning about as well as a cycleway in St Clair. Hooker Liam Coltman was hooked at halftime.
The Reds are a side short on confidence, but it grew as they were handed plenty of opportunities by the visiting team.
On the half hour mark, Lima Sopoaga pulled out an absolute clanger.
Reds halfback Will Genia put in a hopeful chip and Sopoaga dropped it right on his own tryline and winger Rod Davies dived on the ball to score.
Genia then set up another try five minutes later when he again kicked the ball close to the tryline and winger Dom Shipperley grabbed the ball to score.
• Southland announced yesterday it has signed Sopoaga for the next two seasons.
Highlanders v Reds
The scores
Reds 38
Curtis Browning, Rod Davies, Dom Shipperley, Jake Schatz 2 tries; Michael Harris 4 con; Harris pen; Will Genia con
Highlanders 31
Lima Sopoaga, Richard Buckman, Patrick Osborne, Fumiaki Tanaka tries; Sopoaga 2 con; Hayden Parker 2 con, pen
Halftime: 21-0
