Fermanagh booked a Dr McKenna Cup semi-final against Cavan on Wednesday night despite losing 0-12 to 2-5 in Section B against Donegal at Ballyshannon.
Donegal looked on course to pip Fermanagh on scoring average at they led 0-10 to 0-3 at half-time.
But Martin O'Brien and Sean Quigley hit Fermanagh second-half goals as Donegal were fortunate to hold on to win.
But Fermanagh had done enough to qualify with Queen's beating a young Derry side 1-9 to 1-5 at Greenlough.
Donegal's one-point win was not enough to secure them the best runners-up spot with Armagh progressing from Section C also with group winners Tyrone.
The 2012 All-Ireland champions included several of the front-line players for Sunday's game at Father Tierney Park with Paul Durcan and Eamon McGee making their first appearances of 2012 and Frank McGlynn, Christy Toye, Mark McHugh, Neil Gallagher and Paddy McGrath also starting.
The sides were level at 0-2 apiece after 13 minutes but midfield domination then helped the defending Ulster champions fire seven unanswered points with Ryan Melly, Daniel McLaughlin [two], Martin O'Reilly [two] and Eoin McHugh among the scorers.
Daniel Kille's notched Fermanagh's first score in 20 minutes on 33 minutes but Eoin McHugh's point restored Donegal's lead to seven at half-time.
McGlynn's point after the restart extended their advantage to eight but Donegal managed only one further score in the remaining 30 minutes of action as Fermanagh suddenly took control in the middle third of the field.
O'Brien strode through the middle of the Donegal defence to net in the 42nd minute and not even the arrival of Michael Murphy after the black carding of Hugh McFadden could reignite the home team.
For their part, Fermanagh were guilty of some woeful shooting with Sean Quigley particular errant as the Ernemen racked up 15 wides.
Dermot Molloy notched Donegal's last score in the 49th minute but within six minutes, there was only two in it after Damien Kelly, back after his retirement last year, pointed and Quigley ran through unopposed to score another Erne goal.
Quigley did end his run of wides with a successful free in the final minute of normal time but then missed a tricky placed ball chance to level in the final play of the game.
But despite the defeat, Fermanagh had done enough to earn their Wednesday meeting with Cavan while one suspected Donegal weren't overly upset at bowing out of the competition.
Derry manager Brian McIver paraded 12 current under-21 players in his line-up in the game against Queen's which had been switched to Greenlough and the young Oak Leafers struggled to compete physically against the well-drilled student outfit.
James Kearney, Mark Lynch and Niall Toner were on target early on for Derry as they sides were level at 0-3 to 0-3 but Antrim man Ryan Murray hit 1-2 before half-time to help Queen's into a 1-6 to 0-4 advantage.
A series of second-half substitutions included the introduction of Eoin Bradley but Queen's remained in control as two more Murray points helped increase their lead to 1-8 to 0-5.
Greenlough club-man Niall Loughlin netted with five minutes left to cut the deficit to three points but two late black cards Derry reduced to 13 players at the finish as McIver had used up his full quota of substitutions.
|Bank of Ireland McKenna Cup|
Sunday 18 January
Cavan 1-13 0-13 Monaghan
Derry 1-05 1-09 QUB
Donegal 0-12 2-05 Fermanagh
Tyrone 1-11 0-07 Antrim
Semi-finals: Wednesday, 21 January
Cavan v Fermanagh
Tyrone v Armagh