The Clarets fell to their first defeat on the road and only their second loss of their Premier League Cup campaign to leave their last-16 hopes in the balance.
Michael Duff’s side still remain in contention to qualify as one of the top two teams in Group D and their destiny remains in their own hands.
But, depending on how Swansea City do at home to leaders Newcastle United on Monday, the Clarets may need a positive result at home to the Swans in their final group game to advance to the knock-out stages after Colchester struck twice in the second half to seal their first win.
It needed an afternoon pitch inspection at the U’s Weston Homes Community Stadium to get the game on in freezing conditions after heavy rain in Essex.
The Clarets were without leading scorer Dwight McNeil and defender Olly Younger, who were both travelled with the senior squad to Swansea, but almost took an early lead through Ntumba Massanka.
Colchester – beaten 4-0 in the reverse fixture – also had a chance for Tarryn Alarkhai, who shot just wide, and then did go 1-0 in front 10 minutes before the break through Decarrey Sheriff, who followed up a Conor Mitchell save to poke the ball home.
The Clarets responded well and were almost level by half-time as Tommy Wood’s point-blank effort fizzed inches wide and defender James Clarke then saw a header go just past a post.
However, the U’s took just 15 minutes of the second half to double their lead and earn some breathing space through Shariff again, as he rounded Mitchell after latching onto Brennan Dickenson’s pass to slot home.
Despite Burnley’s best efforts to get back into the game, Colchester struck again through Diaz Wright, who drilled the ball in from just outside the box to make it 3-0 with eight minutes to go and leave the Clarets with work to do in a potentially make-or-break last-game decider.
Burnley: Mitchell, Birch, Wilson, Clarke, Koiki, Jackson, Nabi, N’Guessan, Bayode, Massanka (Barnett 80), Wood (Ellison 68). Subs not: King, J Thomas.