A brilliant header from Dean Sturridge brought high-flying Forest's 11-match unbeaten league run to an abrupt halt at Molineux.
But it was an inspired substitution by Wolves boss Dave Jones that turned the game after his men had been totally outclassed by Forest.
Jones brought £1million schemer Kevin Cooper into the action in the 68th minute and he celebrated his return from suspension by creating both the Wolves goals.
The 27-year-old former Wimbledon star pounced on a poor clearance from Forest's highly-rated young defender Michael Dawson in the 75th minute.
Cooper then slipped a perfect pass to Scottish international striker Kenny Miller who lashed a terrific shot past the diving Darren Ward to make it 1-1.
Then, in the 80th minute, Cooper chipped an inch-perfect free-kick into the heart of the harassed Forest defence.
Sturridge, playing through the pain barrier with a knee problem because of Wolves' injury troubles, rose superbly to power his header past the helpless Ward.
The all important goal from Sturridge, - his sixth of the season - stretched Wolves' unbeaten league run to eight games and maintained their determined charge on the clubs leading the promotion race.
Forest, who had not suffered an away defeat since the end of August, always held the attacking reins in a one-sided first half.
But they had to wait until the dying seconds of the half before their efforts were finally rewarded when striker Marlon Harewood gave them the lead with a marvellous shot.
Harewood picked up a pass from Gareth Williams before gliding across the box and blasting a hard angled drive into the far corner of the Wolves net