The Christy Ring Cup winners led 1-11 to 0-7 at half-time, Danny Toner with the goal after 19 minutes, but they failed to score for 26 minutes after the break.
Derry took over and scored 11 points in-a-row, Kevin Hinphey hitting four from play, but rued eight second-half wides as Down rallied to force a replay.
Scorers for Down: –P Braniff (0-7, 0-5 frees), D Toner (1-1), D Hughes, P Sheehan (0-2 each), S Nicholson, G Johnson, J McCusker, M Turley (0-1 each).
Scorers for Derry: A Kelly (0-5, 1 free), K Hinphey (0-4), T McCloskey (0-3, 0-3 frees), O McCloskey, P Henry (0-2 each), A Grant, P Cleary, C Convery (0-1 each).
DOWN: S Keith; M Conlon, P Flynn, P Hughes; M Hughes, C Woods, M Ennis; D Hughes, C O’Prey; S Nicholson, P Braniff, P Sheehan; D Toner, G Johnson, J Coyle
Subs: F Conway for O’Prey (28), J McCusker for Coyle (53), K McGarry for M Hughes (55), M Turley for Sheehan (57).
DERRY: D McDermott; D McCloskey, P Kelly, J McCloskey; R McCloskey, L Hinphey, M O’Hagan; O McCloskey, K Hinphey; B Rodgers, A Grant, P Henry; P Cleary, B Quigley, A Kelly
Subs: C Convery for Henry (HT), T McCloskey for Quigley (40).
Referee: James Clarke (Cavan).