Zarate has scored four goals on loan for Birmingham
Mauro Zarate's late free-kick rescued a point for relegation-threatened Birmingham and dented Everton's hopes of finishing fourth.
Liam Ridgewell volleyed over from six yards before Cameron Jerome headed against the Everton woodwork.
Tim Howard made sensational one-handed saves to deny Radhi Jaidi and James McFadden before Joleon Lescott headed Everton in front from close range.
But Zarate struck a curling equaliser after a handball by Lee Carsley.
With relegation rivals Bolton defeating West Ham, Zarate's strike could prove to be hugely significant.
Interview: Everton boss David Moyes
Birmingham now sit two points above third-bottom Bolton with four games of the season left to play.
But the result is a major blow for Everton's fading hopes of snatching fourth place from Liverpool - and with it a place in the Champions League next season.
David Moyes's team are now two points behind the Reds, who have a game in hand and play Blackburn on Sunday.
It might have been different had Everton scored within the opening minute.
Ridgewell's clearance struck former Birmingham striker Andy Johnson and ricocheted narrowly wide of the home team's goal.
It set the tone for the opening period of play - though only in terms of error-strewn play as opposed to attempts at goal.
Plenty of endeavour but a lack of quality and composure ensured there was not another opening until the 20th minute - and even that was the product of hesitant defending.
The Birmingham defence failed to deal with Steven Pienaar's looping header into the box and Lescott stole in between defenders and goalkeeper, taking the ball wide of Maik Taylor before shooting into the side netting.
Manuel Fernandes inadvertently nudged the ball towards his own goal from a corner but Howard averted the danger, while the Everton keeper later punched clear under pressure in his own six-yard box.
Interview: Birmingham boss Alex McLeish
Birmingham began to assert a degree of control and the crowd was almost rewarded for their increasing enthusiasm with a goal but Jerome's looping header rebounded off the post with Howard stranded.
However, Everton had two late chances to strike before the break.
Yakubu was played in 10 yards from goal but a heavy touch allowed Birmingham to clear before Johnson shot across goal but wide after collecting a pass from his strike partner.
Ridgewell's awful miss came early in the second-half, the Blues defender somehow volleying over the crossbar from five yards.
But if that was poor, then Howard was simply brilliant to keep Birmingham out minutes later.
He was at full stretch to palm away Jaidi's spectacular strike and recovered to save McFadden's follow up.
Fernandes forced a decent save from Taylor with a low strike before Lescott did put the Toffees in front.
Yakubu headed a Lee Carsley cross towards goal and Lescott got the decisive flick.
It was his ninth goal of the season but did not prove to be the winner.
Argentine Zarate came off the bench and struck his beautiful free-kick eight minutes from time to salvage a precious point.
Birmingham manager Alex McLeish: "The resilience and the effort that we put in was excellent.
"The draw was the least we deserved but we would have loved three points. It was a terrific second-half performance.
"We are in a good position at the moment but as I have said the relegation battle will probably go down to the wire."
Everton manager David Moyes: "After going 1-0 up you would have to say it is an opportunity missed but Birmingham fought hard.
"Sometimes you have to hold your hand up and say it was a good free-kick.
"We have three games left at home and one away - and our home form is good. Hopefully we will be able to pick up some important points."
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