Lee Tomlin gave Peterborough the lead from the penalty spot after 12 minutes, his goal coming shortly after Nathaniel Knight-Percival had been dismissed for a foul on Patrick Bamford.
Forward Britt Assombalonga doubled the lead with his sixth goal of the season, before Izale McLeod pulled one back for MK Dons 16 minutes from time.
Mark Little was sent off for the hosts after fouling Dean Lewington with 14 minutes to play, but the visitors could not make their numerical advantage count.
The victory keeps Peterborough in second place, but Wolves are very much on their heels after they edged to a 1-0 win at Shrewsbury Town in the early kick-off.
A late Bakary Sako penalty sealed the points for the visitors after Jon Taylor had been shown a red card for handling Matt Doherty's header on the line.
Sheffield United fell to their fifth straight league defeat as they lost 1-0 at home to Preston North End, David Weir's men succumbing to a second-half effort from striker Stuart Beavon.
Meanwhile, Rotherham United remain in the top six despite only managing a 1-1 draw at Walsall.
Striker Daniel Nardiello opened the scoring for the visitors after 21 minutes, but their lead was short-lived as midfielder Sam Mantom hit back for Walsall to ensure a share of the spoils.
Midfielder Gary Jones scored the only goal of the game as Bradford City stretched their unbeaten league run to five games with a 1-0 success at Gillingham.
Gillingham are now bottom after Notts County beat Tranmere 2-0 to earn their first win of the campaign, Joss Labadie and Marcus Haber netting for Chris Kiwomya's men.
Port Vale twice came from behind to beat Coventry City 3-2, midfielder Chris Birchall scoring the winner against his former club after Tom Pope and Doug Loft had cancelled out strikes from Callum Wilson and Franck Moussa.
Swindon Town pulled off the same feat against Bristol City to secure a 3-2 home win, striker Nile Ranger finding the net three minutes from time after Nicky Ajose had twice levelled for the hosts following goals from Aden Flint and Jay Emmanuel-Thomas.
Carlisle United clinched a comfortable 3-1 win at Stevenage, while Oldham Athletic and Colchester United settled for 1-1 draws with Crewe Alexandra and Crawley Town respectively.
