Haley, who had hitherto maintained a consistent double digit lead against Sheheen, now leads her rival by nine percentage points.
The Republican seems to be conceding the advantage, and the development has set alarm bells ringing among her supporters and the Indian American community.
If elected, Haley -- born of Sikh parents who migrated from Punjab -- would be the second Indian American governor of any US state after Louisiana's Bobby Jindal, and the first ever Indian American woman to occupy a governor's mansion of an American state.
Her victory was so far being considered certain given her consistent double digit lead over Sheheen, but not any longer.
For the first time, support for Haley is below 50 per cent since a July 29 Rasmussen survey.
The latest poll shows Haley still leads Sheheen by nine percentage points, which is similar to a Winthrop University poll released last week.
Undecided voters comprised 11 per cent of those polled. A month ago, Haley had a 50 per cent to 33 per cent lead over Sheheen.
Haley has held double-digit leads in surveys since June with support ranging from 49 per cent to 55 per cent, while Sheheen has captured 34 per cent to 40 per cent of the vote.
Meanwhile, the influential Indian American community across the nation has rallied behind Haley. In fact, more than 30 per cent of her campaign funds have come from outside South Carolina, which is more than three times what Sheheen has raised out of state.
New York-based Lakhwinder Singh, one of the several Indian Americans to send a cheque, said Haley's campaign is most important to him because of their shared heritage. Singh contributed a USD 1,000 for her campaign.
She said Indian Americans had also rallied behind Bobby Jindal in his successful run for the governor of Louisiana.
"We are Indians and she is also an Indian. We like to help our community," she was quoted as saying by the local The Sun News.
Latest fund-raising reports said Haley raised more than USD 2.16 million for the quarter compared to the more than USD 1.8 million raised by Sheheen.
Haley enters the final two weeks of the race with more than USD 700,000 to spend, compared to Sheheen's nearly USD 535,000, reported The State newspaper.
