Jack Defty rescued a point in the fourth minute of injury time to finally breach ten-man Merthyr's resolute defence.
The game livened up when the Welshmen's Chris Holloway – seemingly an amateur Robbie Savage the way in which he wound up Lynn – received a straight red card following his foul on Sam McMahon.
That set up a thrilling final 25 minutes in which boss Tommy Taylor sent on all three subs and Lynn poured forward in desperate search of an equaliser. This left the outstanding Mark Camm as a one-man defence!
It seemed as though a moment of brilliance from the Martyrs' Craig Steins – the ex-Leeds forward had fired into the top corner from outside the box in the 37th minute – had won it until Danny Bloomfield drew the keeper at a quick free-kick and Defty flicked home to the delight of the home fans.
Bloomfield had wasted a superb chance to put The Walks outfit ahead on the quarter-hour mark, placing his shot just wide from McMahon's through-ball.
Defty, Darran Hay and Danny Hammond went close but Lynn could have been 2-0 down at half-time. Merthyr always threatened on the break, and Steins fed strike partner Garry Shephard who sidefooted wide.
On 50 minutes keeper Ashley Morris brilliantly tipped over an O'Halloran header and a Defty header from the resulting corner.
Then came Holloway's exit (which the referee said was for stamping) and Merthyr's retreat, somehow they kept out numerous goalmouth scrambles before Defty's intervention. There was even time for a Mark Angel free-kick to be saved at the death.
Lynn really needed all three points to stay in the play-off picture, and boss Tommy Taylor said: "We've got to rely on other people. We went right to the end, if I had any more forwards to bring on I would!
"It was two points dropped, I don't mind who we play.
"We started sloppily and they scored a great goal. The last 25 minutes we were all over them. We should've got another goal, but it wasn't to be.
"The red card was the right decision, I thought the boy went over the top, after that I thought we could've passed better and a bit quicker.
"We didn't get it out to the wings quick enough, Matt O'Halloran wasn't in the game, that's why I had a moan at half-time."
Gary Setchell picked up his tenth booking of the season and will serve a suspension.
Lynn: S. Wilson, Harvey (Harris 67), Setchell (Quistin 72), McMahon, Hammond (Bacon 85), O'Halloran, Camm, Defty, Hay, Bloomfield, Angel. Subs not used: J. Wilson, Higgs.
Booked: Setchell 10 mins, Hammond 53.
Merthyr Tydfil: Morris, Jones, York (Keddle 85), Griffiths, J. Holloway, Carter, C. Holloway, Clarke, Shephard (Williams 81), Steins, Howells (Bale 79). Subs: Whitcombe, French.
Booked: Clarke 90+4. Sent off: C. Holloway 63.
Referee: C.J. Francis (Little Downham, Cambs). Attendance: 807.