Luis Suarez's first-half header saw Uruguay seal top spot in Group A, but opponents Mexico also qualified for the last 16 despite their defeat in Rustenburg.
Pre-match predictions suggested that the two teams would be content to play out the draw which would guarantee them both a place in the knockout stages - and eliminate South Africa and France.
But with outright victory offering the probable prize of avoiding Argentina in the last 16, an entertaining encounter put paid to those fears, with the match decided when Suarez headed home Edinson Cavani's right-wing cross on the stroke of half-time.
The result meant that South Africa's 2-1 victory over France was not enough for the hosts as Mexico progressed on goal difference, while unbeaten Uruguay qualified top with seven points having still to concede.
Uruguay started brightly in Rustenburg, and Suarez had an early chance to break the deadlock.
But after latching onto a long ball which the Mexico defence failed to cut out, the Ajax striker fired a low shot across the face of the goal and wide of Perez's right-hand post.
The group leaders again went close when Alvaro Pereira was played in down the left flank. But rather than square it to Diego Forlan he sliced a left-footed shot wide, much to the fury of the Atletico Madrid striker.
Moments later, Mexico's Andres Guardado smashed the underside of the crossbar with a 30-yard thunderbolt that only just stayed out.
Giovani Dos Santos was always a lively outlet for Mexico and the playmaker was only just denied a close-range shot by a last ditch tackle from Jorge Fucile.
But on the stroke of half-time, Suarez gave Uruguay a lead they just about deserved.
The impressive Forlan won the ball on the halfway line and fed Cavani on the right wing and his delightful cross was headed down and in at the back post by Suarez.
Cuauhtemoc Blanco, the oldest outfield player at the 2010 World Cup at 37, tested Fernando Muslera with a long-range free-kick as Mexico started the second half in positive fashion.
But Uruguay continually looked dangerous going forward and only a superb save from Oscar Perez kept the scores level.
Forlan was again the provider with the former Manchester United striker whipping in a fierce free-kick that Lugano powerfully headed towards goal from close-range, only for Perez to palm it away at full stretch.
Mexico had their best chance shortly after the hour but after fine cross from substitute Pablo Barrera, PSV Eindhoven defender Francisco Rodriguez headed across goal and wide from only six yards out.
Mexico dominated possession in the final stages of the game as they went in search of an equaliser with Uruguay dropping deeper and deeper.
Uruguay held on and the result from the other match in Bloemfontein meant both teams were able to celebrate at the final whistle.
Attempts on target
Attempts off target
Projected table based on current scores
|Group A teams||P||W||D||L||F||A||GD||PTS|
|Group B teams||P||W||D||L||F||A||GD||PTS|
|Group C teams||P||W||D||L||F||A||GD||PTS|
|Group D teams||P||W||D||L||F||A||GD||PTS|
|Group E teams||P||W||D||L||F||A||GD||PTS|
|Group F teams||P||W||D||L||F||A||GD||PTS|
|Group G teams||P||W||D||L||F||A||GD||PTS|