THE Linnets deserved a point, but a two-minute period in the second half swung the game.
The game was all square at 1-1, Lynn having equalised just before half-time with Paul Watts scoring on his debut after signing on a match-by-match basis.
Jamie Clarke, who with Craig Clark had returned from a three-match suspension, missed a glorious opportunity.
A couple of minutes later Lilywhites sub Leon Gutzmore headed the winner with his first serious touch.
It was cruel on the visitors, who had looked the side more likely to score in the second half on the usually heavy Cambridge pitch.
"If Clarkey had scored I think we would have won the game," said Linnets manager Tony Spearing.
The Lilywhites bossed the early exchanges and after just a minute Kevin Wilkin was just off-target with a header from a Martin Fox corner.
Roy Essandoh famous at Wycombe for a header which knocked Leicester City out of the FA Cup could not repeat that moment when he hit the bar from another corner in the tenth minute.
City went ahead midway through the first half following a Glen Fuff foul just outside his area. Fox rifled a left-foot curler into the top right corner of the helpless Steve Wilson's goal.
With former Lynn centre-half Colin Vowden looking shaky, the Linnets fought back.
Their first chance was on the half-hour when Jamie March crossed and Watts turn-and-shot was not strong enough to beat home keeper Matt Nurse.
Watts eagerness got the better of him when he took the ball off Zeke Rowe, who was better placed for the shot.
The tall striker made amends when he neatly drilled home from the left of the box low into the net a left-wing centre from Adie Hayes which Rowe had flicked on.
Lynn came out strongly for the second half, dominating the early play. Hayes had an effort blocked by Nurse following a breakaway.
After the hour mark, Rowe won a corner which Fuff headed over. The sides traded bookings, making it four for Lynn so much for the new disciplinary code!
The away fans cheered when skipper Dave Robinson, returning from a long injury lay-off, came on for Kevin White in midfield.
Then after 76 minutes came the turning point. A goal-kick went straight to Rowe, who back-headed to Watts, whose shot was parried by Nurse.
Clarke, racing in from the left, was presented with an open goal, but blazed past the far post.
Two minutes later Gutzmore, who had replaced the ineffective Essandoh, expertly nodded home into the top corner an Adam Wilde cross. It was one of City's few second-half chances.
Lynn threw on Lee Hudson and Tommy Wright, but their only chance was when Wayne Anderson beat Nurse to a header and the ball dribbled wide.
Lynn: Wilson, Dakin, March, Clark, Fuff, White (Robinson 70), Anderson, Hayes, Rowe (Hudson 82), Watts, Clarke (Wright 82).
City: Nurse, Wooding, Fox, Wignall, Vowden, Wenlock, Nightingale, Challinor, Wilkin, Essandoh (Gutzmore 61), Wilde. Subs (not used) Flitton, Sturgess.
Bookings: Lynn - Anderson (19, foul), Fuff (21, foul), March (29, foul), Clarke (69 dissent).
City - Nightingale (66, foul), Challinor (84, foul)
Lynn News Man of the Match: Paul Watts