After a goalless first half, Arron Davies put the Grecians in front with a thumping shot that gave Luke McCormick in the Argyle goal no chance. But Argyle levelled when substitute Luke Young curled home a brilliant free-kick from 25 yards.
Alan Gow put Exeter back in front seven minutes from time with a delightful chip from the corner of the penalty box before Scot Bennett wrapped up the win with a tidy finish in stoppage time.
"The result is very hard to take," said Sheridan.
"After we equalised I thought we were the team who were going to go on and win it. We were confident and causing them problems. We shot ourselves in the foot and for the last five minutes we were all over the place.
"It was self-destruction. It was not a 3-1 game but for 80 minutes I thought we put on a really good performance. But it is the result we have lost again and that is all I look at, at the end of the day.
"We needed to stay solid and keep our shape after we got back into it. The second goal hit us hard and they could end up scoring four or five based on how we played in the last few minutes.
"It was very disappointing derby game. We switched off. We have got to play for 90 minutes and we didn't."