Mackail-Smith nodded home from close range shortly before the break to settle a game that was low on quality throughout.
The Blades were second best and rarely looked like scoring, with Joe Lewis not having to make a save of note in the entire 90 minutes.
Posh were good value for the win, but it will do little to help their relegation woes as they remain 11 points from safety and they look destined for League One football next term.
Kevin Blackwell's men continued their abysmal away form with a woeful display and although they are only four points adrift of the top six, they will have to show considerable improvement if they are to make the play-offs.
The game was contested between a Peterborough side who had lost eight of their last 10 games and a Sheffield United side that had lost their last their last six on the road and it was evident from the off that both were struggling for form.
The Blades controlled much of the early possession, but it was Peterborough that fashioned the only real chances of the opening exchanges.
Dominic Green had a fierce drive well saved by Mark Bunn and Lee Frecklington volleyed wide when he had time and space shortly after.
Posh could not capitalise on those early opportunities though and a first half that was low on skill was played mainly in the middle third.
However, five minutes before the break Jim Gannon's men were able to produce a rare moment of quality and it saw them take the lead.
A neat move down the right saw Posh earn a corner and from that Charlie Lee's thumping header was superbly turned onto the bar by Bunn.
But the home side were not to be denied and Mackail-Smith was on hand to nod in the rebound, which went in off the bar for his ninth of the season.
It completed a miserable first half for the Blades, who lost both Ched Evans and Jamie Ward to injury.
The Blades started the second period brightly and they unlocked the Peterborough defence for the first time with a neat interchange between Henri Camara and Stephen Quinn, and as the diminutive midfielder's left-foot shot looked to be heading into the bottom corner, Lee produced a fine block to deny a certain goal.
The Blades could not create any momentum though and Peterborough should have doubled their lead with 15 minutes remaining as after Bunn could only palm a dangerous Mark Little effort into his goalmouth, the ball fell kindly for Tommy Rowe, but he blazed his effort over from eight yards.
It was a Sheffield United performance void of attacking guile and creativity and they looked toothless against one of the leakiest defences in the league, with Nick Montgomery's hooked shot their only meaningful effort on goal in the final 30 minutes.