Former Glory whiz kid Danny De Silva gave Sydney a 2-0 lead in the 87th minute, following on from Adam Le Fondre's first-half strike.
But in a frantic finish to the match on Friday night, Chris Ikonomidis pulled a goal back in the 90th minute, before Brendon Santalab thought he scored the equaliser in the third minute of stoppage time.
However, the goal was disallowed for Joel Chianese's foul on goalkeeper Andrew Redmayne.
Replays showed Chianese make the slightest of tugs on Redmayne's arm.
But Glory players were furious about the decision, with the result ending their unbeaten start to the season.
The 10,356-strong crowd also voiced their displeasure.
Glory will drop to second on the ladder if Melbourne Victory beat Melbourne City on Saturday night.
Sydney are now just three points adrift of Glory, with the two teams to face off again in Perth next month.
The temperature was still hovering at 32.8 degrees at the 6.15pm kick-off, and there was plenty of heat on the field as players from both sides engaged in some testy niggles.
Glory's hopes of notching a third straight clean sheet were dashed after just 18 minutes when they failed to clear a corner.
Aaron Calver made the most of the scrap to tap the ball in the direction of Le Fondre, who slotted his right-foot straight to record his seventh goal of the season.
Glory striker Andy Keogh came close to scoring in the 31st minute, only for his near-range strike to be blocked by the right bicep of Sydney goalkeeper Andrew Redmayne.
But the real drama didn't come until the dying minutes.
De Silva, who was a Glory crowd favourite when he made his debut at 15 years of age, came back to haunt his former side.
The speedy attacker sneaked past Glory's defensive line, brushed past Dino Djulbic before slotting Sydney's second goal.
