The Hawkeyes allowed the Big Ten's worst team to shoot 64% from the floor and 60% from three-point range.
Freddie Dilione's free throws with 1.5 seconds remaining secured another horrific road loss for Iowa basketball.
The Hawkeyes had a chance to throw up a prayer, but couldn't even get a shot up before the horn expired.
Iowa, which many projected as an NCAA tournament lock after its win over Ohio State on Wednesday, now owns losses over Minnesota, Maryland, and Penn State.
The Hawkeyes drop to 20-9 overall and 10-8 in Big Ten play with the loss.
First Half
Slow starts have plagued the Hawkeyes throughout the month of February - especially in Wednesday's win over Ohio State - but they came out firing in Happy Valley. The small crowd at the Bryce Jordan Center often forces visiting teams to create their own energy, but Iowa showed little trouble by racing out to a 13-7 lead.
Penn State's offense has struggled to shoot the three ball during conference play - entering Saturday's game 7/37 in its last five - but it made five of its first seven in the first half. Freddie Dilione (a 29% three-point shooter) was the main nemesis for the Hawkeyes, making three triples in the period en route to a first half-high 13 points.
Penn State shot a scorching 57% from the floor in the first and felt good about itself when it led 32-30 with 2:00 left in the period.
But that's when Cooper Koch entered the party.
The redshirt freshmen has been inconsistent from beyond the arc all season, but he saved one of his best performances when Iowa was desperate for a bucket. Koch netted a career-high four triples in the first, and the last one helped the Hawkeyes take a 38-34 lead into the break.
Second Half
Penn State has played some of the league's best very tough at home this season - losing to Michigan and Michigan State by a combined six points - and the challenge for Iowa was to make sure it kept the Nittany Lions away from striking distance.
It looked like that could be the case after the Hawkeyes raced out to an early six-point lead, but Penn State quickly reminded Iowa it was going to need a 40-minute effort to leave with a victory, going on a 9-0 run to take a 48-45 lead.
Both teams traded buckets over the next few minutes, which is when Alvaro Folguieras threw down a powerful dunk for his first points of the day. That proved to be the spark he and the Hawkeyes needed, and a second slam (off a steal) forced a Penn State timeout and gave Iowa a three-point lead.
But the Nittany Lions just wouldn't go away. The Hawkeyes had no answer for Josh Reed in the half, and Reed helped Penn State jump to a 62-58 lead with six minutes to go (he finished with 25 points).
Just when Iowa fans began having flashbacks to the Maryland loss on Feb. 11, they watched their team orchestrate a 9-0 run to regain a five-point lead with 3:49 left. Koch, who cooled off for most of the period, delivered a crucial and-one late in the shot clock to bring the Hawkeye bench to its feet.
Iowa held a 67-64 lead for nearly two minutes, but it couldn't seem to get the clinching basket. Penn State took advantage with a pair of free throws, and Reed gave the Lions the edge with a layup in the final minute.
Stirtz tied the game at 69 with 8.6 seconds left, but Penn State still had plenty of time to win the game.
It did just that.
Dilione was fouled while driving to the basket and made both free throws to give the Nittany Lions the lead and the victory.
Up Next
The Hawkeyes return to action next Thursday, March 5, for their home finale against No 3 Michigan. The Wolverines, 27-2 overall and 17-1 in Big Ten play, clinched the outright Big Ten regular season championship with a win at Illinois on Friday.
Tip off is set for 7 p.m. CST on Peacock.