Two goals from Scott Vernon gave Colchester the derby honours at Layer Road.
The U's striker gave his side the lead on 28 minutes after good work by Kevin Lisbie and doubled the advantage 15 minutes from time.
Alan Lee twice went close for Blues and Jordan Rhodes was denied by Dean Gerken as Town's Play-Off hopes took a jolt.
Town boss Jim Magilton stayed with the same team that drew with QPR last weekend, David Norris and Shefki Kuqi both not recovered from injury in time to make the squad.
Town had a flurry of corners in the opening minutes, Gavin Williams firing just wide from the right flank.
Lisbie shot over from an offside position as Colchester rallied, Karl Duguid then sending a free-kick over the bar after Sito had been booked.
Vernon headed over, Alex Bruce had a shot blocked from a corner before the first real opening saw Lisbie head over from Johnnie Jackson's cross.
Alan Lee tested Dean Gerken in the U's goal with a header from a corner, Lee then failing to beat the 'keeper with another chance from Williams' cross.
Velice Sumulikoski was then denied by Gerken before Colchester took the lead on 28 minutes. John White's long ball saw Lisbie drift behind the Town defence, the former Charlton striker held up the ball well before setting up Vernon who calmly flicked the ball past Stephen Bywater.
Sito made a terrific block on Lisbie's shot but Town responded, Lee toe poking the ball wide from a good position, then Danny Simpson saw a close range shot beaten out by Gerken.
Blues did have the ball in the net seconds before the break, Alan Quinn's shot headed in by Danny Haynes but not before the offside flag was raised.
Gary Roberts replaced Quinn justbefore the hour, Haynes then exploded down the right flank, leaving Matt Heath in his trail but his cross was behind Lee and the danger was cleared.
Jackson sliced his shot wide from Lisbie's cross before Town made a second change, Rhodes on for Sumulikoski.
Owen Garvan headed a free-kick on to the roof of the net as Blues pushed for an equaliser but it was Colchester who grabbed a second, Lisbie heading on and Vernon beating Bywater with a shot that went in off the post.
Roberts sent a free-kick over the bar, Rhodes then spinning away from his marker but his cross failed to trouble the U's defence.
Good work by Lee saw him work his way into the home box but Haynes failed to get on the end of the cross, then Haynes beat White but his cross was cleared. Tommy Miller replaced Williams for the last ten minutes.
Rhodes was inches away from his first goal for the club at senior level, 'keeper Gerken pushing out his effort while at the other end, Lisbie pulled his shot just wide after twisting and turning past Jason De Vos.
Alex Bruce headed off the line afterBywater had failed to clear, with Lisbie finishing the game as he had spent most of it, causing the Town defence problems with his movement, the frontman firing high and wide after a strong run.
The win keeps Colchester afloat in the Championship with Town looking to bounce back with crucial home games against Cardiff and Norwich to come over the next week.
Colchester: Gerken, Ifil, Coyne, Heath, White, Duguid, Jackson, Hammond, Elito, Vernon, Lisbie. Subs not used: Izzet, McCleod, Guy, Balogh, Cousins.
Town: Bywater, Simpson, Bruce, De Vos, Sito, Williams (Miller 82), Sumulikoski (63), Garvan, Quinn (Roberts 57), Lee, Haynes. Subs not used: Colgan, Wright, Rhodes. Booked: Sito
Att: 6264


















