Leading 12-0 after 20 minutes, the Waratahs looked on course for easily their biggest scalp of the season before the Hamilton-based outfit reeled off five consecutive tries to turn the contest on its head.
While discipline helped NSW take control early, they made too many errors in the second period as the Chiefs' Damian McKenzie found sizzling touch and helped his side take control via midfield domination.
The Waratahs have only won twice this season - both times against the Crusaders - but could have moved into the top eight with a victory on Friday night.
Down 12-0 early, the Chiefs soared over the Waratahs in the second half. (Dean Lewins/AAP PHOTOS)
"The first 40 was a really good battle, we controlled field position, we maintained dominance through our ball (but) the second half probably wasn't as consistent," Waratahs captain Jake Gordon told Stan Sport.
"We turned (ball) over on the wrong side of the field and we allowed their backs to get quality ball and they were too good.
"We needed to find a way to get down their end a little bit more.
"We knew how dangerous they were with the ball so it was a balance between giving them possession but also defending well, so we probably got the balance wrong."
Three Chiefs tries in the 20 minutes after halftime effectively locked in the points.
First McKenzie put winger Emoni Narawa away, then halfback Cortez Ratima exploited sloppy defending soon after, before a bruising run from No.8 Wallace Sititi split the NSW line.
Lachie Swinton dragged a try back to give the Waratahs some late hope, before Chiefs counterpart Kaylum Boshier flashed serious pace to snuff that completely.
Damian McKenzie starred for the Chiefs, including with this superb tackle on Mark Nawaqanitawase. (Dean Lewins/AAP PHOTOS)
Having weathered an early storm, the Chiefs would perhaps have been the happier team at halftime with the sides tied at 12-12.
The Waratahs produced a barrage in the opening 20 minutes in which they crossed twice and forced so many penalties referee Jordan Way sent Chiefs second-rower Tupou Vaa'i to the sin bin for repeated fouling.
NSW hooker Julian Heaven dashed off the back of a broken maul to score the opening try while halfback Jake Gordon produced a similar move for 12-0.
But the Chiefs struck back through fullback Shaun Stevenson - who injured his hamstring in scoring - before a superb lofted ball from McKenzie put Narawa through.
Chiefs winger Etene Nanai-Seturo also served 10 minutes off the field for a high shot on Mark Nawaqanitawase, although questions were asked of referee Way's non-call on a brutal late hit Samipeni Finau put on Tane Edmed.
Chiefs captain Boshier said a simple gameplan had carried them to the win.
"We know the Waratahs are physical. If you don't win the physical battle against them then you're probably going to be on the wrong end of the scoreboard," he said.
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