In treacherous conditions at WIN Stadium, Kyle Flanagan's boot and the Raiders' ill-discipline proved the difference as both sides scored two tries apiece.
But Flanagan was able to nail five-from-five off the tee, including a superb effort from the sideline with howling wind and driving rain flying into his face.
Canberra's first loss in almost three months means they will fall off the top of the ladder if Canterbury beat Wests Tigers by 17 or more on Sunday.
Ricky Stuart's men are also just one win clear of Melbourne, putting a first-week home final in jeopardy.
Making matters worse for the Raiders is second-rower Hudson Young being placed on report for a shoulder charge on Hame Sele in the first half.
The Dragons' faintest of final hopes are also still alive, albeit while needing to win their last five games to have any chance of making the top eight.
So wild was it in Wollongong, the hill was closed due to pre-match lightning and Jamal Fogarty at one stage needed a teammate to hold the ball on the tee for him.
But ultimately St George Illawarra were able to handle it best, completing at 88 per cent and doing enough to control field position regardless of the weather.
It was field position that got the Dragons their first try, when Lyhkan King-Tongia put Mat Feagai through a hole off the back of six straight sets on the Raiders' line
Canberra struck back through Matt Timoko, but back-to-back penalty goals allowed the hosts to kick clear at 10-4.
And when Jamal Fogarty put Timoko over for his second just before the break, it looked as if the Raiders would cruise home with the wind in the second half.
But with the howling wind against them, the Dragons somehow clinched the win.
Corey Allan crossed off a questionable Feagai pass in the left corner, Flanagan iced the kick and then nailed another penalty goal to make it 18-10.
While a late penalty got Canberra back within six with four minutes to go, a last-ditch attacking raid ended with a clunky obstruction.
And with that St George Illawarra claimed their best win of 2025, snapping a four-game losing streak in the process and blowing open the NRL's minor premiership race.
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