A brace from Tai Sodje, a wonder strike from Micah Hamilton and a goal from Alex Robertson cancelled out two Liverpool penalties either side of half-time to give Carlos Vicens' side a hugely important league win.
After a fast start from both sides, it was City who had the first real chance, after Oscar Bobb cut in from the left and hit an effort from the edge of the box just wide.
Vicens' side continued to hunt for an early opener, and top goalscorer, Sodje found it 15 minutes in.
A superb run from Joe Hodge allowed the midfielder to cross over to the City number-nine, who headed in at the back post for his tenth league goal of the season.
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Despite taking the lead, City were pegged back just before the half-hour mark as the referee adjudged that Callum Doyle had fouled in the penalty area.
Layton Stewart stepped up for Liverpool and converted to level the game at 1-1.
In spite of this, a moment of brilliance from Hamilton in the final moments of the first half ensured we went in at the break ahead.
The winger cut in from the left and fired a stunning effort from 20 yards into the far corner to regain our advantage at the halfway point.
The beginning of the second half was a case of deja vu for City as Liverpool levelled from the spot for the second time in the game, after Shea Charles was penalised in the penalty area.
Again Stewart stepped up and found the target for his, and the Reds' second of the afternoon.
The City youngsters looked to instantly hit back as Carlos Borges pulled a ball back for Bobb, however his curling effort from the edge of the box whistled just over.
The visitors then had a golden opportunity at the other end after a cross across the City box found Stewart, whose effort from inside five yards rolled wide.
In a game that meant so much to both sides at the top of the U18 Premier League North table, the two teams continued to battle in search of a winner and it was that man, Sodje who looked to have got it for City.
A corner was met by the rising head of Doyle, before Sodje latched onto the effort and diverted home with his back to goal to give Vicens' side the lead for the third time.
Robertson sealed the win in the dying moments with a strike from the edge of the box to cap a superb display from the City youngsters.
HOW WE LINED UP
Josh McNamara's goal was protected by a back four of Kwaku Odoruh, Shea Charles, Callum Doyle and Juan Larios.
Harvey Griffifths, Alex Robertson and Joe Hodge formed our with midfield, whilst Oscar Bobb, Micah Hamilton and Tai Sodje made up the front three.
WHAT IT MEANS
The win means City stay third in the league table, three points behind leaders Manchester United with two games in hand.