The game had been heading for a goalless draw when a Kevin Phillips shot was deflected to the right.
David James, who had previously given a flawless performance, became entangled with Seb Larsson and conceded a somewhat harsh penalty.
But the win cannot hide Birmingham's lack of firepower which was plainly evident in a desperate game in which Portsmouth's own shortcomings are of growing concern.
While Portsmouth's side is in the process of being dismantled in several departments, newly-promoted Birmingham found life in the higher division a massive challenge which could become even more of a task as the season progresses.
Both teams were coming off 1-0 defeats and eager to carve out a much needed win, but neither side had the early creativity to dominate exchanges.
Birmingham played with plenty of vigour but there was no end product much to the frustration of the home fans.
This was emphasised when Larsson meekly headed over from a Gregory Vignal cross.
Portsmouth also lacked the drive to take control and the result was something of a stalemate in a game played at a hectic pace.
Birmingham dropped skipper Lee Carsley and drafted in Scotland international striker Garry O'Connor to give Cameron Jerome more support but the partnership badly misfired.
Both players struggled with ball control and as a result posed few threats to the composed Portsmouth goalkeeper James, who produced a five-star performance.
The secure play of James, who has been linked with a departure, was the main reason Pompey were able combat the Birmingham attacks in the first 45 minutes.
Jerome limped out of the game after 52 minutes to be replaced by veteran Phillips, but the ace goal poacher was unable to find a way through a Portsmouth defence which played solidly under the control of skipper Sylvian Distin.
Birmingham had a massive let-off in the 55th minute when Frederic Piquionne mis-hit shot went straight to the unmarked Hayden Mullins but he was caught unaware and his effort cannoned wide of the post with only Joe Hart to beat.
Stand-in centre-back Franck Queudrue then came to Birmingham's rescue to rob Piquionne as the Pompey striker was about to shoot.
The best goalscoring attempts occurred when first Larsson fired in a 25-yard free-kick over the wall but James flicked the ball over the bar.
James then excelled when he pushed away a mis-hit shot from Phillips which appeared to sum up the game.
But then he conceded the penalty which McFadden slammed high into the roof of the net.