Highlanders fly-half Mike Delaney kicked six penalties and a conversion and the home side crossed for two tries to claim their sixth win of the season and close the gap on the New Zealand Conference leaders, Waikato Chiefs.
The Blues showed a much more spirited performance than in recent weeks and started brightly as they looked to end a run of four consecutive defeats.
Rookie full-back Hadleigh Parkes put the Blues ahead in the fourth minute after the Highlanders, looking rusty after coming off a bye week, gifted away possession in their own 22.
Centre Shaun Treeby fumbled a pass from scrum-half Aaron Smith and the Blues moved the ball wide for Parkes to cross in the corner.
"It was probably the exact opposite of how we wanted to start. We knew if we gave them a start they would be in it for the whole game," Highlanders captain Jamie Mackintosh said in a pitchside interview.
Treeby did not dwell on the mistake and he was on hand to dart clear for the Highlanders opening try eight minutes later after Delaney started the move with an exceptional reverse pass.
Both sides were then guilty of ill-discipline as the match turned into a kicking duel with Delaney and Blues' fly-half Gareth Anscombe trading efforts as the home side went in at half-time 16-14 ahead.
A plethora of penalties followed at the start of the second half as the lead changed hands frequently, prompting referee Bryce Lawrence to warn both sides but he somehow refrained from showing any yellow cards.
The Blues introduced All Black half-back Piri Weepu shortly after half-time and his clever pop pass allowed centre Rene Ranger to dive over at full stretch for the Blues second try in the 53rd minute.
Fly-half Anscombe converted to hand the Blues a 27-22 lead with 25 minutes remaining as the visitors eyed only their second win of the season.
However, Ranger went from hero to villain 15 minutes later when he and winger Benson Stanley failed to deal with a Gear grubber kick, allowing Highlanders replacement Kurt Baker to sneak in and touch down for the home side's second try.
The television match official wasted little time in awarding the score and the Highlanders were 30-27 ahead with 10 minutes remaining.
In the final minutes, the Blues rejected a couple of chances to kick a penalty to level the scores as they opted to run the ball to chase a rare victory but the home side held firm.
"We did well, still just those little errors creeping in," Blues captain Luke Braid said. "We are pretty disappointed, if we were still in the run for the competition, we would have taken the draw."