Londoner Defoe, signed in January from MLS side Toronto to help Sunderland climb away from danger, sent a dipping thunderbolt over Newcastle keeper Tim Krul just before halftime to send the home fans into delirium.
It proved enough to earn Sunderland a first league win in eight attempts and give manager Dick Advocaat a victory in his second match in charge since replacing Gus Poyet.
Relegation-haunted Sunderland moved up to 15th place in the table, three points above third-from-bottom Burnley who had earlier drawn 0-0 at home to Tottenham Hotspur.
It was Sunderland's fifth derby win in a row and they deserved the spoils after playing the better football in a typically frenetic clash, with Defoe impressive throughout.
His winner arrived out of nowhere in first half stoppage time and in its own way was just as spectacular as Stoke City midfielder Charlie Adam's 60-metre goal at Chelsea on Saturday.
A long punt forward was flicked on by Steven Fletcher and Defoe, lurking just outside the area, connected with his left foot, sending the ball on an unstoppable trajectory over Krul.
The former England striker appeared close to tears as he walked off the Stadium of Light pitch at the break and was given a standing ovation when he was substituted later.
“It's unbelievable,” Defoe told Sky Sports as he watched a video monitor showing his goal.
“I just concentrated on the strike. As soon as it left my foot I knew it was a goal. An unbelievable feeling, words can't describe the way I felt.”
Newcastle applied some late pressure in a desperate bid to avoid a fourth consecutive league defeat and the home fans had their hearts in their mouths when Ayoze Perez fizzed a volley just over the crossbar as full-time approached.
Newcastle remained in 13th place with 35 points.
If there was tension aplenty at Sunderland, Burnley's home stalemate with a lacklustre Tottenham side resembled a training ground kickabout at times.
Spurs barely managed an effort on target while Burnley's best two chances fell to striker Danny Ings.
He fired straight at Tottenham keeper Michel Vorm after some sloppy defending early on and then forced a fine save from the Dutchman with a curling effort just before the interval.
Spurs, who could have moved above Liverpool into fifth with a victory, showed little attacking intent with England new boy Harry Kane, captain for the day, largely anonymous.
Burnley remained in the relegation zone but moved back above Queens Park Rangers into 18th place, two points behind Aston Villa who lost 3-1 at Manchester United on Saturday.
Despite not capitalising on the game's best chances, Burnley manager Sean Dyche said he was happy enough with his side.
“It was a strange game and that sometimes happens when the sun shines out of nowhere - especially up here,” he told the BBC. “Every point is vital and it's a clean sheet against a good side. Sometimes you've got to be realistic and accept that.
“We're not disappointed. We went for the win and created chances that could have won the game.”
Tottenham clambered ahead of Southampton into sixth spot with 54 points, the same as Liverpool, but their hopes of finishing in the top four and qualifying for the Champions League are fading fast.
On Saturday Chelsea stretched their lead at the top to seven points with a 2-1 victory over Stoke, although Manchester City can cut it to six if they beat Crystal Palace on Monday.
Original source: Defoe's cracker seals Sunderland win