Targeting a first-ever major tournament win as an independent nation, Georgia made a blistering start with a breakthrough inside two minutes.
Mikautadze latched onto a misplaced pass from Antonio Silva, and the Georgian striker threaded a neat ball into the path of Kvaratskhelia, who finished superbly into the far corner.
Unbeaten in their last 18 matches after scoring first, Willy Sagnol’s men looked to build on that early goal, but Portugal gradually grew into the contest, with Cristiano Ronaldo and Joao Palhinha both seeing powerful efforts thwarted by Giorgi Mamardashvili.
Roberto Martinez’s heavily rotated side continued to probe for an equaliser as the first half progressed, but clear-cut chances came at a premium as Joao Felix fired a long-range strike narrowly wide.
Having restricted Portugal to little in terms of goalmouth action, Georgia came close to doubling their lead at the other end, as Kvaratskhelia’s inviting free-kick was glanced agonisingly wide by Giorgi Gvelesiani.
The opening stages of the second half followed a similar pattern to the first, with Georgia on the front foot and threatening in the final third.
Diogo Dalot saw a curled effort tipped around the post for Portugal, but it was Sagnol’s side who made their pressure count when VAR deemed Silva to have tripped Luka Lochoshvili in the box.
Mikautadze assumed the responsibility from the spot and stroked the resulting penalty into the bottom corner for his third goal of the tournament - giving Georgia vital breathing space heading into the final 30 minutes.
Portugal looked to up the ante in pursuit of a dramatic comeback late on, however, it never looked likely as Mamardashvili saved from Nelson Semedo, allowing Georgia to coast through the final minutes and set up a fascinating last-16 tie against Spain.
As for Portugal, Martínez’s side will be desperate to bounce back in the knockout stages when they face Slovenia on Monday.
Flashscore Man of the Match: Khvicha Kvaratskhelia (Georgia)