A second half opener from Billy Sharp, as well as a Callum Morton own goal, handed Sheffield United the three points at London Road.
The loss means Posh now have only one win in their last 13 Championship matches and remain in the relegation zone.
They now face an FA Cup clash with QPR before returning to league action against Cardiff City.
Here are the best of today’s transfer rumours...
9. Posh ace wants out amid Blackpool interest
Peterborough United captain, Oliver Norburn, has reportedly asked the club to consider a bid from Blackpool as he looks to return to the north for personal reasons. The midfielder has made 25 Championship appearances since joining Posh last summer. (Daily Mail) Photo: John Early
10. Ex-Forest man a target for Atletico Madrid
Aston Villa and ex-Nottingham Forest defender, Matty Cash, has emerged as a surprise target for Atletico Madrid. However, the Premier League side have no intention of selling the 24-year-old. (The Sun) Photo: James Gill - Danehouse