Chelsea were punished for some woeful defending as they slumped to a potentially costly defeat.
The Blues, chasing a top-four finish, were two down at the interval at Bramall Lane after goals from David McGoldrick and Ollie McBurnie.
And McGoldrick, whose goals were his first in the Premier League, sealed Sheffield United’s win after an error by Antionio Rudiger.
Chelsea went behind on 18 minutes, when McGoldrick tucked away the loose ball after keeper Kepa Arrizabalaga had parried McBurnie’s shot.
McBurnie headed home for the Blades 15 minutes later.
Enda Stevens got away from Willian on the left and swung a cross into the box, where McBurnie darted in front of Kurt Zouma to score.
Chelsea had plenty of possession but struggled to create clear-cut chances – and Tammy Abraham was twice unable to apply the finish when opportunities came his way.
McGoldrick, on the other hand, made no mistake when Rudiger made a mess of trying to cut out Lys Mousset’s pull-back, enabling the veteran striker to score again.
Chelsea: Kepa, James (Hudson-Odoi 75), Christensen (Rudiger 45), Zouma, Azpilicueta, Jorginho, Mount (Alonso 45), Barkley (Loftus-Cheek 78), Willian, Pulisic (Giroud 66), Abraham.
Subs not used: Caballero, Loftus-Cheek, Kovacic, Batshuayi, Bate.