Dortmund had scored four times in 13 minutes in the first half but saw their lead evaporate after the break as Schalke, who had won four of their last five league games before Saturday refused to surrender.
The Royal Blues became only the second Bundesliga team in history to avoid defeat after trailing by at least four goals, after Bayern Munich, who won 6-5 at VfL Bochum after trailing 4-0 in 1976.
There was more misery for Dortmund, without a league win since September, as top striker Pierre-Emerick Aubameyang, who had scored one goal and set up another, was sent off in the second half for a foul that earned him a second yellow card.
"At halftime I honestly did not believe we could still get a point from the derby," Schalke coach Domenico Tedesco said.
"That is why it feels so good. That second half was top level football."
Yet under-pressure Dortmund coach Peter Bosz, whose future at the club hangs in the balance, could only reflect: "It is difficult to deal with it. You just feel disappointment.
"That should never happen, that there is a 4-4 at the end. Not even with a red card. We just did not play football anymore."
Initially, Dortmund had looked nothing like the team that had lost four of their five previous league games.
They shocked the visitors, who had started the game in second place, with Aubameyang's 12th minute strike.
Much worse was to come with Schalke defender Benjamin Stambouli spectacularly volleying an own goal in the 18th minute before Mario Goetze headed in an Aubameyang cross two minutes later.
With Schalke in complete shock, Raphael Guerreiro completed their first half onslaught with a fine volley in the 25th.
But the visitors came back, cutting the deficit with goals from Guido Burgstaller on the hour and Amine Harit, who later limped off injured, leaving his own team with ten.
Daniel Caligiuri's 86th-minute left-footed missile set up a frantic finale and Brazilian Naldo made sure Germany's fiercest football rivalry lived up to its reputation for drama with his stoppage-time equaliser.
The result put Schalke on 24 points in third, with Dortmund on 21 in fourth.
RB Leipzig are second on 26 after their 2-0 win over Werder Bremen. Leaders Bayern Munich, top on 29, travel to Borussia Moenchengladbach later on Saturday.
(Reporting by Karolos Grohmann; Editing by Ian Chadband)
