Manchester United lost top spot to arch rival City after a shock 1-0 defeat at Norwich City.
After City had thrashed Aston Villa 5-0 earlier this afternoon, only a win would have been enough for United to jump over their neighbours once again.
However, with England striker Wayne Rooney missing because of tonsillitis, the Red Devils produced a lacklustre display as the Canaries - reborn since the international break - produced another composed display to secure a third win in five Premier League games with a fine header from Anthony Pilkington on the hour.
Leading scorer Robin van Persie had recovered from the thigh strain which kept him out of Holland's midweek friendly with Germany, while Javier Hernandez also started for the visitors after his match-winning cameo at Aston Villa last weekend. Anders Lindegaard kicked off in goal for David de Gea, who was troubled by a wisdom tooth.
It was a lively start by United as Van Persie created the first opening inside three minutes, turning to drive in a low shot from the edge of the Norwich penalty area which John Ruddy palmed away low to his right.
Norwich were defending with two banks of four, but also looked to use wingers Robert Snodgrass and Pilkington on the counter.
On six minutes, Wes Hoolahan fed Pilkington down the left following a quick break after a United corner, but the former Huddersfield man lacked support and could only flash a drive wide across goal from 20 yards.
United, though, continued to have all the possession, and enjoy plenty of time on the ball as the home side sat deep.
On 21 minutes, full-back Patrice Evra was inches away from connecting with Ashley Young's left-wing corner after arriving at pace to the far post.
Norwich, though, showed some life in attack when Hoolahan floated a ball over from the left, which Snodgrass diverted just over the angle with a backward header.
A sweeping move switched play from the right out to Pilkington, who then released left-back Javier Garrido, and his low centre flashed across the face of Lindegaard's goal.
Norwich continued to grow in confidence and it needed a brilliant saving tackle from Chris Smalling to prevent captain Grant Holt from tapping in Snodgrass' low cross after the Scotland winger got past Rio Ferdinand into the right side of the United penalty area on 37 minutes.
Veteran Ryan Giggs, who scored a last-minute winner here last season on his 900th appearance, floated in a lovely ball behind the Norwich backline, but Van Persie missed his kick when attempting an acrobatic volley.
Young then drilled in a low effort at the back post from a corner, which Ruddy turned behind from point-blank range.
United opened the second half as they had the first, with Van Persie again losing his footing when played into a promising position inside the Norwich box.
After Snodgrass had been pushed over by Evra out on the right, his deep free-kick flew through the United penalty area before it was eventually hacked clear off the line by Rafael.
Norwich continued to press and finally were rewarded on the hour with a goal of real quality.
Garrido was played in on the overlap down the left by Hoolahan, and his perfectly weighed cross was glanced over Lindegaard into the top corner by Pilkington, who was once a player in the United youth system.
Ferguson had seen enough and within 10 minutes veteran midfielder Paul Scholes, who turned 38 yesterday, and England striker Danny Welbeck were off the bench, replacing Antonio Valencia and the ineffective Hernandez.
United upped the tempo, as Welbeck's looping header was deflected behind for a corner.
It continued to be one-way traffic as the Canaries defended resolutely.
With seven minutes left, Norwich boss Chris Hughton made a double change as Steve Morison and Jonny Howson replaced Holt and Hoolahan.
Ferdinand, meanwhile, came off for Anderson.
With a minute left, Wales forward Morison released Howson clear on goal, but the former Leeds midfielder scuffed his shot wide.
There were four minutes of stoppage time and Ruddy produced a brilliant saved to turn the ball over after it was deflected off Norwich defender Sebastien Bassong.
At the final whistle, Carrow Road erupted as United went the same way as Arsenal had done four weeks ago.