The thrilling clash in Asuncion started with Sergio Orteman latching on to a Pablo Zeballos cross to open the scoring for Olimpia in the sixth minute.
However, Ronaldinho assisted Vagner Love, who equalised three minutes after the break, before Zeballos put Olimpia ahead again in the 51st minute.
Eduardo Aranda made it 3-1 in the 70th minute and Dario Bottinelli reduced the deficit for Flamengo four minutes later, but it was vain for the Brazilian team.
"We gained three very important points by beating very tough opponents. Flamengo fought until the last minute of the game," Orteman told Fox Sports.
"We relaxed a little bit and they damaged us and made us suffer."
Olimpia went level with Lanus of Argentina on seven points and sent Flamengo third.
Defensor Sporting, meanwhile, claimed a 1-0 home win over Mexican giants Guadalajara in Uruguay.
A 71st-minute goal from Nicolas Olivera helped Defensor climb up to the second in Group Seven, but the remainder of their participation will not be easy as they have to play both Velez Sarsfield of Argentina and Ecuador's Deportivo Quito.
Guadalajara played with 10 men from the 40th minute as midfielder Julio Nava was sent off.
In Chile, Universidad Catolica edged out compatriots Union Espanola 2-1 in Group Three.
Catolica took the lead in the seventh minute, when Roberto Ovelar headed a Felipe Gutierrez cross into the back of the net.
And though Gonzalo Villagra equalised at the 85th, Daud Gazale gave Mario Lepe's Catolica the win two minutes later.
Despite the defeat, Union Espanola stayed at the top of the group on seven points alongside Bolivar of Bolivia, with Catolica third.