Blues appeared to be coasting to a comfortable win following David Cotterill's first-half strike when Britt Assombalonga grabbed a fine equaliser in the 84th minute.
Assombalonga was Forest's hero with his goal but he then became their villain five minutes later when he pushed the ball over the bar with his arm and was sent off for the offence.
Paul Caddis, who had missed the previous penalty he had taken at St Andrew's, made no mistake from the spot sending goalkeeper Karl Darlow the wrong way.
It was something of a set-back for Forest after two successive wins over Norwich and Wolves had put them on the edge of the play-off zone.
But on a special Trevor Francis day in honour of their former star, who was inducted into the Birmingham Hall of Fame, Blues responded to the occasion with another morale boosting victory.
A revitalised Blues quickly demonstrated their freshly-acquired confidence against the previously in-form Forest.
They played with a pleasing eager approach which had Forest on the defensive. Teenager Demarai Gray proved particularly troublesome with his jinking style of play.
Showing cool composure, he confidently pulled the ball back on the edge of the penalty area, wrong-footing the Forest defenders in the process only to glide his side-footed shot wide of the post.
Forest's response was generally orchestrated by Michail Antonio. On several occasions he tormented Caddis without being able to set up a goalscoring opportunity.
The opening goal came unexpectedly in the 10th minute with no apparent danger to Forest's defence.
Cotterill gained possession on the edge of the area and produced a speculative left-footed swinging shot which he arrowed into the top far corner of the net.
Boosted by the goal, Blues strived to increase their lead with Gray continuing to torment the Forest defence with his speed and ball control.
Blues' high-tempo game kept Forest at full stretch and they had a lucky let-off in the 31st minute.
A first-time cross by Caddis was deflected by Danny Fox onto the top of the crossbar with Darlow nowhere near the ball.
Former Blues favourite Chris Burke finally emerged following a slow start with a characteristic powerful drive in the 43rd minute with Forest's first shot on target but Darren Randolph was alive to the danger to make a comfortable save.
In search of the equaliser, Forest stepped up their game in the second period with Henri Lansbury playing a pivotal midfield role.
Blues weathered the storm and Clayton Donaldson went close to scoring only to be thwarted by a fine save by Darlow who was later very nearly caught out by a long-range lob by Cotterill from the halfway line.
Forest Manager Stuart Pearce made substitutions to inject more life into Forest's bid to get back into the game and was rewarded when Assombalonga headed home after Jamie Paterson had flicked on Antonio's cross.
Blues immediately hit back with Caddis sealing the win with his successful penalty.
Assombalonga was Forest's hero with his goal but he then became their villain five minutes later when he pushed the ball over the bar with his arm and was sent off for the offence.
Paul Caddis, who had missed the previous penalty he had taken at St Andrew's, made no mistake from the spot sending goalkeeper Karl Darlow the wrong way.
It was something of a set-back for Forest after two successive wins over Norwich and Wolves had put them on the edge of the play-off zone.
But on a special Trevor Francis day in honour of their former star, who was inducted into the Birmingham Hall of Fame, Blues responded to the occasion with another morale boosting victory.
A revitalised Blues quickly demonstrated their freshly-acquired confidence against the previously in-form Forest.
They played with a pleasing eager approach which had Forest on the defensive. Teenager Demarai Gray proved particularly troublesome with his jinking style of play.
Showing cool composure, he confidently pulled the ball back on the edge of the penalty area, wrong-footing the Forest defenders in the process only to glide his side-footed shot wide of the post.
Forest's response was generally orchestrated by Michail Antonio. On several occasions he tormented Caddis without being able to set up a goalscoring opportunity.
The opening goal came unexpectedly in the 10th minute with no apparent danger to Forest's defence.
Cotterill gained possession on the edge of the area and produced a speculative left-footed swinging shot which he arrowed into the top far corner of the net.
Boosted by the goal, Blues strived to increase their lead with Gray continuing to torment the Forest defence with his speed and ball control.
Blues' high-tempo game kept Forest at full stretch and they had a lucky let-off in the 31st minute.
A first-time cross by Caddis was deflected by Danny Fox onto the top of the crossbar with Darlow nowhere near the ball.
Former Blues favourite Chris Burke finally emerged following a slow start with a characteristic powerful drive in the 43rd minute with Forest's first shot on target but Darren Randolph was alive to the danger to make a comfortable save.
In search of the equaliser, Forest stepped up their game in the second period with Henri Lansbury playing a pivotal midfield role.
Blues weathered the storm and Clayton Donaldson went close to scoring only to be thwarted by a fine save by Darlow who was later very nearly caught out by a long-range lob by Cotterill from the halfway line.
Forest Manager Stuart Pearce made substitutions to inject more life into Forest's bid to get back into the game and was rewarded when Assombalonga headed home after Jamie Paterson had flicked on Antonio's cross.
Blues immediately hit back with Caddis sealing the win with his successful penalty.