Tom Barrasso's side put in a composed and measured performance and, after weathering an early storm, imposed themselves in all areas of Nottingham's home ice.
The win moved them up to sixth.
The Play Off place seekers had on-form goalie Jackson Whistle to thank for a brilliant first-period individual performance, which started with a glove save inside two minutes when Alex Guptill skated unopposed between the circles.
At the other end, though, Sheffield grabbed a 1-0 lead at 5;21 when Evan McGrath circled the net and back-handed a wrap-around with Mike Garnett taking too long to get across his line.
Tom Zanoski took an interference penalty at 6:25 though and after four Whistle saves, he was eventually beaten by a deflection off Davey Phillips, Mark Hurtubise credited with the strike at 8:27.
Sheffield then took another penalty, for too-many-men on the ice, but Panthers couldn't repeat their earlier execution.
And Jackson made a simply astonishing save from Robert Lachowicz to keep the sides level and followed that up by swallowing another shot following a Ben O'Connor turn over.
The GB netminder was in superb form, but the discipline from the skaters in front of him also was worthy of note in a first period which saw Panthers outshoot Steelers 21-8.
Robert Dowd, back after injury, almost deflected in a John Armstrong cross at the start of the second session.
Sheffield had their first powerplay of the night at 27;12 and Jordan Owens scooped in a 2-1 go-ahead goal from close range.
And Owens added his second of the night on a four-on-four play, rifling top shelf from the right flank.
Workaholic Sheffield were good value for the second period scoreline.
Panthers have looked lightweight against Sheffield at some points this season and they were outworked at the start of the third.
They couldn't seem to unnerve Whistle during moments of pressure.
And Sheffield's defensive play again looked impressive.
They sat back, played conservatively, and then Zanoski scored a fourth from Eric Neiley at 54:33.
Sheffield had made been comfortable but Nottingham edged back with a second goal, from Chris Stewart at 57;36.
The home side had a 6-on-4 PP advantage with 99 seconds left, but Ryan Martinelli scored an empty netter.?
Saturday 16th February
Belfast Giants 4 Glasgow Clan 1
Cardiff Devils 6 Milton Keynes Lighting 5
Fife Flyers 4 Coventry Blaze 7
Manchester Storm 1 Guildford Flames 6
Nottingham Panthers 2 Sheffield Steelers 5
Sunday 17th February
Coventry Blaze v Sheffield Steelers - 5.15pm
Dundee Stars v Fife Flyers - 5.00pm
Glasgow Clan v Belfast Giants - 4.00pm
Guildford Flames v Manchester Storm - 6.00pm
Milton Keynes Lightning v Cardiff Devils - 5.15pm