Phillips one-timed a pass from Dany Heatley on a two-on-one break just inside the post along the ice on Andrew Raycroft, the Senators' bench emptying in jubilation after yet another win over the Leafs.
Ottawa improved to 4-1-0 against Toronto this season and an amazing 11-2-0 since the lockout ended.
The Leafs appeared cooled out and headed home with a 2-1 lead thanks to Boyd Devereaux's first goal as a Leaf with 6:20 left in the third period. But Chris Kelly, standing alone in front of the net, silenced the Air Canada Centre when he banged home a pass from the corner from Wade Redden with 2:06 left in the third.
Ray Emery made 43 saves and was named the game's first star, continuing his brilliant goaltending after posting back-to-back shutouts.
Alexander Steen also scored for the Leafs (17-17-6), who have won only four of their last 16 games.
Dean McAmmond also scored for the Senators (21-18-1), who moved three points ahead of the Leafs in the standings.
The Battle of Ontario might as well have been renamed the Battle of the Wounded for this night with the Senators deprived of their top two centres in Jason Spezza (knee) and Mike Fisher (knee), while the Leafs were once again without forwards Darcy Tucker (bruised foot), Kyle Wellwood (groin/hip), Alexei Ponikarvosky (shoulder), Nik Antropov (ankle sprain) and of course former Selke Trophy winner Michael Peca (broken leg), who's out for the year.
Steen opened the scoring with 1:06 left in the first period, one-timing a pass in the slot from Jeff O'Neill on a Leafs power play. That ended Emery's shutout streak at 149 minutes 42 seconds. He stopped 70 consecutive shots before Steen beat him.
McAmmond tied the game 1-1 with a short-handed goal 5:37 into the second period, shovelling in a rebound over a sprawled Raycroft after the Leafs goalie stopped Chris Kelly on a breakaway.
Leafs defenceman Tomas Kaberle had a glorious chance to put Toronto ahead with 6:30 left in the second period, but he missed an open net on a rebound after Emery stopped a Mats Sundin blast.
Moments Heatley was ropped by Raycroft at the door step with a beauty of a glove save from the Leafs goalie, Devereaux skated in on a two-on-one and ripped a wrist shot top corner over Emery's stick side, igniting a raucous celebration among the louder than usual 19,483 fans at Air Canada Centre.
But Kelly, who also had two assists on the night, forced overtime.
Notes: The two provincial rivals next meet Feb. 3 at Ottawa ... The Senators return home to host the Atlanta Thrashers in an afternoon game New Year's Day, while the Leafs host the Boston Bruins that same night ... Defenceman Carlo Colaiacovo was a healthy scratch for the Leafs, Brendan Bell taking his spot in the lineup.