United's defence is notoriously porous and arguably cost them promotion last season, while it has been little better this time around, with a number of combinations failing to return a clean sheet prior to today.
But Grayson stumbled across the right formula this afternoon - although Greg Halford did go close to scoring for Pompey - and Pugh's 14th-minute header, his first since returning to the club from Stoke after five years away, helped extend Leeds' unbeaten run to four games.
They are now perched just outside the play-offs - having played a game fewer than everyone else - but the situation is not so pleasant for Portsmouth.
Last-minute losers against Peterborough in midweek, they have still to win away from home and have just nine points from their 10 games so far, with only the dire form of the likes of Bristol City, Coventry and Millwall keeping them out of the drop zone.
Leeds' defensive record over the last 18 months has been so poor that even chairman Ken Bates voiced concerns about it in midweek, and Grayson's response was to recall the previously-ostracised full-back Paul Connolly for a first appearance in a month.
Portsmouth also made a change on the back of recent performances, with goalkeeper Jamie Ashdown's blunder against Peterborough seeing him lose his place at the expense of Stephen Henderson.
Grayson's decision to extend an olive branch to Connolly was vindicated early on, with his more experienced presence allowing Scotland winger Robert Snodgrass, no longer having to lie deep with rookie Tom Lees, to flourish.
Everything Leeds did early on went through Snodgrass, and his ninth-minute cross laid on the first opportunity, with Joel Ward digging the ball out as Andy Keogh looked set to pounce.
Snodgrass then skipped past Tal Ben Haim and worked his way into the box to produce a cutback that looked to have allowed Ross McCormack to score for the seventh league game in a row Greg Halford's block sent the ball behind.
Portsmouth put the subsequent corner straight back out for another one and from it, Pugh struck.
Having scored five goals inside a month of signing for the club in 2004, the home fans were well aware of his prowess in the area, and he displayed it once more as he lost Halford eight yards out and headed in Snodgrass' centre.
Leeds continued to impress after the goal, with Snodgrass driving just wide of the post after a 60-metre run on the back of Andy Lonergan's quick throw, before the same player worked an angle for Pugh who saw an effort blocked by Halford.
Despite his inconsistencies in his own box, Halford's presence caused mayhem at the opposite end not long after, with his header from Liam Lawrence's free-kick forcing Lonergan into a wonder save, while he hit the bar on the follow-up.
Jason Pearce then cleared a McCormack cross from under his own bar, and although Lonergan had to beat away a Halford free-kick, Leeds remained in control through to the break - but Portsmouth looked decidedly livelier after it.
Ward's ball in behind caught the home defence napping and Lonergan had to be alert to save at the feet of David Norris, while some good tracking from Aidy White stopped Lawrence from fashioning an opening.
Leeds were feeling the tension of having failed to score a second when on top, and Halford's ability to get on the end of almost every ball played into their box added to their worries, with Darren O'Dea deflecting one of his efforts behind.
At the other end, substitute Mikael Forssell was denied a clinching second by Henderson's flying save, but even though Lonergan had to scramble to tip over a Halford cross, Leeds held on without extending their advantage.