The 2-2 draw damages Leicester's play-off hopes as, on 61 points, they remain outside the top six.
They took the lead at the King Power Stadium early on when Birmingham defender Curtis Davies headed into his own net from a Leicester corner.
Birmingham leveled in the second half through striker Nikola Zigic. However, Leicester thought the win was theirs when Jeff Schlupp headed home from a corner 15 minutes from time.
However, when David Nugent hacked Wes Thomas down in the final minute, referee Mick Russell pointed to the penalty spot despite replays proving that the foul was outside the area.
Nonetheless, Birmingham substitute Chris Burke scored the penalty to give Birmingham a share of the spoils and move them up to 13th in the league.
Leicester started the game well and forced Jack Butland into a smart stop to deny Nugent from 20 yards. From the resultant corner, Wes Morgan put pressure on Davies and the Birmingham skipper could only direct his header past Butland for 1-0.
The hosts had chances to extend their lead before the break. Michael Keane headed over from another set-piece, something that seemed a vulnerability to the Birmingham backline. Nugent skewed a shot wide of the target shortly afterwards.
However, Nathan Redmond was lively for Birmingham and the winger forced two good saves out of Kasper Schmeichel at the other end. Shane Ferguson saw a volley cleared off the line by Paul Konchesky's thigh as half-time approached.
Birmingham finally found their deserved equaliser on 61 minutes. Zigic applied the finish to a neat passing move that saw Mitch Hancox and Shane Ferguson combine down the flank.
Schlupp, who had previously hit the bar, headed home a Matt James corner on 75 minutes.
Nevertheless, with the match entering stoppage time, sub Wes Thomas went down under Nugent's clumsy challenge and the referee gave a penalty. Burke slotted home the spot-kick.
Birmingham have now lost just once in their last seven games and, before Saturday's matches, were seven points off the relegation zone with four fixtures left to play.
Source: DSG