Fred scored from close range two minutes from half-time to calm the nerves of the five-time world champions and Confederations Cup title holders after Diego Forlan had first missed a penalty for Uruguay.
But Edinson Cavani levelled three minutes after the restart and thereafter the hosts were rocking before Paulinho rose high to plant a firm close-range header past Fernando Muslera in the Uruguay goal to pull off a barely deserved victory.
Cavani said the penalty miss was "a shame as we were playing well but we have to take it on the chin."
Matches between the South American neighbours have long been tense affairs - not least since the Uruguayans shocked the Brazilians in the 1950 World Cup final in Rio to deny their hosts a first title.
But what gave this meeting added spice were pre-match comments by Uruguayan skipper Diego Lugano labelling Brazilian starlet Neymar a diver.
Brazil made a sluggish start and Lugano was to the fore as he won a penalty for the Uruguayans after 16 minutes.
The veteran defender tussled with Chelsea centreback David Luiz in the box and went down - but Chilean referee Enrique Osses quickly spotted that Luiz had tugged on his rival's shirt and gave the spotkick.
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