Larsson curled home an injury-time free-kick off the foot of the post eight minutes after David Vaughan had dragged the Black Cats back into a game they looked destined to lose with a stunning 30-yard piledriver.
Until Vaughan's intervention, it looked as though it would be Rovers easing themselves out of Premier League relegation trouble with a second successive victory after Simon Vukcevic's 17th-minute opener at the Stadium of Light on Sunday.
Steve Kean's men also had a second goal ruled out for a foul by Chris Samba on keeper Keiren Westwood, but eventually succumbed as the home side improved markedly after a poor first half.
It was just Sunderland's fourth home win in 2011 and their second over Blackburn, and just what the bulk of a crowd of 39,863 had turned up to see.
Chairman Ellis Short, writing in his programme notes for the game, admitted he had ended Steve Bruce's tenure because the team had been under-performing for a significant period, and not as a knee-jerk reaction to the home defeat by Wigan in his final game at the helm.
The American had hoped for an immediate lift by replacing him with O'Neill, the man whose appointment Sunderland fans have dreamt of for years.
However, just as the Irishman had predicted, the goodwill with which he had arrived by virtue of his support for the club as a boy, would take him only so far.
In fairness, the boos which greeted the half-time whistle were not aimed at him, but at an insipid 45 minutes which summed up many of the problems which ultimately led to Bruce's demise.
Toothless in attack and panic-stricken in defence, the Black Cats squandered opportunities at one end and gifted them at the other to leave the manager in little doubt as to the task he faces.
O'Neill gambled on the fitness of young striker Connor Wickham in his return from a knee ligament injury and Sunderland started brightly enough as full-back Phil Bardsley saw a third-minute shot deflected wide by Chris Samba and then had another effort blocked by Jason Lowe three minutes later.
However, it was Rovers who took the lead and they did so with the help of some woeful defending by the Black Cats.
Morten Gamst Pedersen's driven free-kick was somehow allowed to reach Samba on the edge of the penalty area and after he had controlled deftly, he drilled a deflected right-foot shot across Westwood.
The Republic of Ireland international could only palm the ball away and midfielder Vukcevic, playing in a protective face mask, headed into the empty net.
Sunderland should have been level within two minutes, but their lack of confidence in front of goal came back to haunt them once again.
Stephane Sessegnon got in behind full-back Gael Givet, who left the pitch five minutes later after complaining of a high heart rate, and squared the ball perfectly for Kieran Richardson.
The midfielder had just Paul Robinson to beat from six yards, but he took a heavy touch and then saw his effort smothered by the keeper as he came to meet him.
Bardsley had another shot blocked by Lowe and Sessegnon fired wide from the rebound, while Vaughan curled over from distance as Sunderland pressed for an equaliser.
But the Black Cats might have found themselves further behind four minutes before the break when Westwood failed to collect another Pedersen free-kick and Scott Dann headed home, only for referee Peter Walton to rule that the keeper had been impeded by Samba.
Martin Olsson, who had replaced Givet with 22 minutes gone, failed to re-appear after the break with Adam Henley taking his place, and he was soon followed by Grant Henley, who came on for Michel Salgado with six minutes of the half played.
Sunderland had started brightly and went close with 54 minutes gone when Richardson's inswinging corner hit the near post with nobody close enough to capitalise on the rebound.
Rovers gradually eased their way back into the game as an attacking force, having seemed largely content to soak up pressure.
However, Robinson had to pull off a fine 65th-minute save to keep out Richardson's volley after it took a wicked deflection off Pedersen.
O'Neill sent on winger James McClean and striker Ji Dong-won for Jack Colback and the tiring Wickham with 14 minutes remaining, but it was Sessegnon who had the home fans on their feet which he sent an acrobatic overhead kick just over the bar.
But Vaughan gave Sunderland hope with six minutes remaining when he ran on to a loose ball and blasted home from distance with Robinson helpless.
The keeper was equally powerless to deny Sunderland victory when, two minutes into injury time, Larsson curled his free-kick over the wall and in off the foot of the post to snatch a much-needed victory, although an injury which saw Lowe carried off on a stretcher delayed the celebrations.