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Not since the Blues posted a 4-0 win over Woolwich Arsenal 106 years ago has a City side won so comprehensively in this fixture.
The Blues, irresistible in the opening period, opened a three-goal lead by the break after playing some scintillating counter attacking football.
Any worries of a Carabao Cup final hangover were swept away with an 18-minute three-goal blitz that the Gunners simply couldn’t cope with, effectively ending the contest.
Ederson saved a second-half penalty to compound Arsenal's miserable evening.
Arsenal began brightly and went close a couple of times in the opening 15 minutes, but each time either Ederson or Vincent Kompany snuffed out the danger.
In fact, the Gunners looked lively in possession and up for the battle until the Blues broke the deadlock in devastating fashion with a quarter-of-an-hour played.
Leroy Sane, clearly in the mood to inflict harm on the home side, collected the ball on the left and then set off on a slalom-type run that wouldn’t have looked out of place in the winter Olympics.
The exciting young German glided past four Arsenal players and took out another two with a pass to Bernardo Silva who checked inside before curling a sublime shot over Petr Cech into the top left-hand corner of the net.
Arsenal tried to respond quickly and Granit Xhaka saw a 25-yard free-kick pushed around the post by Ederson and then Aaron Ramsey saw a shot plucked out of the air by the Brazilian.
The Gunners were pushing for an equaliser that, at that stage, they would probably have deserved – but City’s next attack on 28 minutes would further punish the home side.
David Silva began the move, holding off a challenge on the left flank before finding Sane who burst down the wing before picking out Sergio Agüero whose gentle pass into Silva’s path saw the Spaniard leave Hector Bellerin flat-footed before lifting the ball over Cech.
It was breathless and brilliant – and there was more to come.
Arsenal were wounded and looked a little shell-shocked, but the pace and movement of City’s third goal just five minutes later was something close to perfection.
David Silva started the move on the halfway line, played it to Aguero who laid it off to Kevin De Bruyne – he threaded the ball to the overlapping Kyle Walker and his cross was bundled home by Sane from close range.
De Bruyne very nearly set up Aguero six minutes later but the Argentine was denied his 200th goal for the Club by Cech.
And as free-flowing as City were in attack, so in defence the Blues were solid as a rock with Kompany, Nicolas Otamendi and Danilo throwing their bodies on the line to keep the hosts from pulling a goal back.
As the home side walked off to loud jeers, the statisticians revealed this was the first time in Premier League history the Gunners had conceded three first-half goals. Quite a feat by the Blues.
Arsenal were always going to come out and give it a go in the opening minutes, knowing one goal could possibly lead to more if they could get the Emirates crowd on their side.
And on 52 minutes they were presented with the ideal opportunity to start a fightback when Otamendi’s clumsy challenge on Henrikh Mkhitaryan resulted in a penalty – but Ederson was equal to Pierre-Emerick Aubameyang's spot-kick, pushing the ball to safety – his third penalty save of the season.
City soaked up Arsenal pressure for a while, though never looked in any real danger and the only real chance for the visitors came when Agüero forced a good save from Cech with another rapid counter-attack.
That was about it, with the Emirates virtually empty by the time the referee blew for full-time following a superb night’s work from the Blues.
Not a bad way to celebrate Pep Guardiola's 100th match in charge!
Sane creating a goal out of nothing for Bernardo with the game finely poised was undoubtedly the game's major turning point.
Simply sensational, Leroy.
City extend the lead at the top of the Premier League to 16 points and need just five more wins to guarantee the title.
The big games are coming thick and fast and on Sunday the Blues host Chelsea in the Premier League.
Then, next Wednesday, FC Basel are at the Etihad for the second leg of the Champions League Round of 16 tie with City 4-0 up from the first leg.
A week on Monday, the Blues travel to Stoke before a 19-day break in Club action due to a blank Saturday caused by Brighton's involvement in the FA Cup followed by an international break before a resumption of Premier League action away to Everton on 31 March.
City keepers have now saved 11 of the last 19 spot-kicks faced - not including two penalty shoot-out triumphs!
The Blues have beaten Arsenal three times this season.
Sane has scored in successive Emirates visits.
City posted just a second win in the league away to Arsenal since 1975.
Tonight's starting XI, bench and vital stats...
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We take a look at four key duels which could decide the outcome of the game.