Luton had enough chances to have won this game themselves, which left their manager Mike Newell bemused at the end.
His strikers were woeful in front of goal and keeper Dean Gerken also pulled off several great saves to keep the Hatters at bay.
At the other end, Colchester showed them how to do it in devastating fashion to clock up their tenth home win on the trot.
It has already been a remarkable season for the U's, who are playing in the second tier of the Football League for the first time in their history.
They have settled so well that they are even pushing for a play-off place.
Former Swansea winger Kevin McLeod settled the home nerves by scoring in the 23rd minute. It was a well worked corner with Kevin Watson and Kemal Izzet exchanging a one-two before Izzet crossed from McLeod to nod home in style.
Luton's front pairing of Rowan Vine and Dean Morgan, who both used to play for Colchester, suffered bad days against their former team. Both were denied by the acrobatics of Gerken in the first period.
Chris Iwelumo had only passed a late fitness test on a knee injury but he was to have a great afternoon sparked off by his 41st minute volley to put the U's two up.
Jamie Cureton started the move by finding Richard Garcia on the right flank and the Australian whipped over a cross for Iwelumo to volley home from eight yards out.
Just before the hour mark, Garcia was celebrating his fifth goal of the campaign when stretching to divert home Watson's free-kick.
Three down, there was little hope for Luton especially as winger Ahmet Brkovic then produced one of the misses of the season.
Kevin Foley did all the hard work to set him up and, although keeper Gerken was out of position, Brkovic could not hit the target with an empty goal beckoning and lifted his shot over the bar.
Luton's anguish was completed when Iwelumo scored his second goal of the game and his 12th of the season in the 65th minute. It was his strike partner Cureton who delivered the cross for the big Scotsman to head home.
The visitors at least grabbed a consolation with five minutes remaining when Garcia was adjudged to have pushed skipper Chris Coyne in the box, allowing Vine to convert the penalty for his 12th of the season.