Tony Pulis' side scored three times in 14 thrilling minutes to turn the game on its head after the visitors had led by two at the break in a cracking match.
Scunthorpe stunned over 20,000 home fans when former Stoke striker Martin Paterson gave them a seventh minute lead with his 13th goal of the season.
Matthew Sparrow chipped the ball forward and Paterson got in behind a statuesque home defence to tuck a ten-yard shot underneath Steve Simonsen's dive.
The goal inspired the visitors and visibly shook Stoke, who were just regaining their composure when Scunthorpe struck again in the 23rd minute.
Ian Morris floated over a left-wing corner and Jack Hobbs steamed in totally unmarked to power an unstoppable header past a bewildered Simonsen.
Stoke should have clawed one back just after the half hour when Leon Cort's close-range header from a Liam Lawrence corner was aimed too close to Joe Murphy.
Ricardo Fuller then fired into the sidenetting after skinning Andy Butler, but the Iron, well-organised and working their socks off, retained their cushion at the break.
The Stoke fans found their voice again at the start of the second period in a desperate attempt to spark a comeback.
And it was on the cards in the 53rd minute when Lawrence drove in an angled shot after Hobbs could only help on a long throw from Rory Delap.
Stoke were now pouring forward in droves in an electric atmosphere and it was no surprise when they drew level in the 62nd minute.
Fuller hooked Lawrence's throw back from the byline and substitute Richard Cresswell struck a first-time shot which flicked Murphy's fingers on its way in.
And City's 66th minute decisive third was down to the brilliance of Fuller, who went on a storming run to leave three defenders floundering before setting up a tap-in for Lawrence.