Jason Euell put the hosts ahead in the third minute and Hameur Bouazza added a second eight minutes later to effectively secure the points before the half-time whistle had sounded.
Holloway's reputation was badly in need of repair after he presided over Leicester's relegation in May 2008 and was subsequently shown the door at the Walkers Stadium.
A year out of the game seems to have recharged his batteries and Blackpool are reaping the benefits after an outstanding start to the season.
This was their third home win of the campaign and had the home fans dreaming about winning promotion to the Premier League.
The result enhanced the Seasiders' play-off credentials and made a further mockery of the pundits who tipped them for relegation at the start of the season.
Blackpool, who pushed Stoke all the way in the Carling Cup in midweek before losing 4-3 in a thrilling encounter, were vibrant from the outset against Darren Ferguson's men.
They could have led inside the third minute when midfielder Keith Southern fired goalwards from 20 yards and Posh goalkeeper Joe Lewis was forced into a smart stop.
Seconds later, however, the opening goal came when left-back Stephen Crainey crossed dangerously and Euell rose highest to plant a firm header past Lewis from 12 yards.
Peterborough sought to find an immediate response and Aaron McLean saw his shot blocked by Blackpool defender Rob Edwards.
Yet Holloway's side retained the upper hand and after Brett Ormerod spurned a clear-cut opening from just six yards out, Bouazza added a second in the 11th minute.
Defender Neal Eardley's throw-in found its way through the former Watford and Fulham striker and he swept the ball home left-footed from six yards.
Blackpool were dealt a blow in the 18th minute when Eardley was forced off through injury and replaced by youngster Ashley Eastham.
Both sides created chances before the break as Peterborough striker George Boyd had a shot blocked by Edwards and Ormerod then drove wide from 12 yards.
Six minutes before the break, Posh midfielder Lee Frecklington had the chance to throw his side a lifeline when he volleyed over the bar from six yards out.
It could have got worse for the visitors in the 54th minute when Ormerod flighted in a delightful cross which former Rangers midfielder Charlie Adam rifled over.
Shortly after the hour mark, Holloway replaced the hard-working Ormerod with fresh legs in the form of Ben Burgess.
Burgess came close to adding a third for Blackpool in the 80th minute when he engineered the space to strike a fierce shot goalwards.
Lewis repelled his effort but Blackpool had long since secured the points.