The senior guard drilled his game-winner with 11.4 seconds remaining and Tennessee trailing 87-86.
The lead see-sawed in the final minute after Tennessee held a 41-40 halftime advantage and its largest second half lead was five points (79-74) with 2:24 remaining.
Before his game-winner, Lofton had made only 4 of 12 shots, including 2 of 10 three-pointers.
Wayne Chism led the way with 23 points and seven rebounds.
JaJuan Smith had 19 points, five rebounds and three assists.
Tyler Smith scored 13, all in the second half, while Lofton had 10 points, three assists and four rebounds for the top-seeded Volunteers (29-3), who have won four in a row.
South Carolina (14-18) was led by Devan Downey's 26 points, five assists and five steals.
It was the final game for retiring South Carolina Coach Dave Odom.