The 34-year-old from Dalgety Bay could only manage fourth on the grid for today's opening race of the British Touring Car Championship triple-header at the Fife track.
Defending champion Shedden lapped the 1.3-mile circuit in 52.581secs, 0.110s slower than Audi's Rob Austin, who shattered the previous Knockhill qualifying record lap of 52.999s on his way to claiming his first pole.
Shedden, whose Honda Racing Civic is laden with 27kg of success ballast, said: "I really thought we had enough pace to get pole. Still, I'm on the second row and if I get a good start I'm certainly confident I can push for the win in race one. I've won here before and I'd love to do it again."
Shedden, who entered the weekend third in the title race, outpaced his Honda team-mate and championship leader Matt Neal who could only manage sixth- fastest with his 45kg of ballast.
Former Knockhill race instructor and 2009 BTCC winner Colin Turkington lines up second on the grid, having missed out in his BMW by just 0.047s. Andrew Jordan starts third.
It was a mixed day for the other Scots in the BTCC. Inverness-based Dave Newsham lines up 15th in his Toyota, while debutant Kieran Gallagher from Kilmarnock starts 24th in his Vauxhall.
Aiden Moffat, 16, from Dalkeith, on course to become the youngest- racer in the BTCC, had to sit out qualifying after the engine of his Chevrolet blew up in free practice. If his team can rebuild it overnight, he will start from 26th and last place.
Shedden had words of encouragement for the youngster, who is stepping up from the Celtic Speed Mini Cooper Cup. "In some ways, starting from the back of the grid will help Aiden.
"He'll be able to set his own pace and shouldn't get mixed up with cars all around him. It's a huge jump and he's really chucking himself in at the deep end."
In the Porsche Carrera Cup, Kirkcaldy's Rory Butcher lines up second in his Celtic Speed Porsche 911 GT3 Cup.