A goal from Sam Edozie and a superb, second half brace from Cole Palmer - including a 25-yard goal of the season contender - rounded off a fantastic derby display by the City youngsters.
The win now means Enzo Maresca's side can be crowned Premier League 2 champions on Monday evening, if both Tottenham Hotspur and Blackburn Rovers fail to record victory this gameweek.
Maresca's side flew out of the blocks and could have had the lead inside five minutes.
With the Premier League 2 title in our sites City looked in the mood early on in the derby, and our dominance finally paid off 15 minutes in.
A superb interception from Romeo Lavia allowed the midfielder to square the ball to Edozie, who tapped into an empty net from six yards to give City a deserved lead.
The City youngsters did not take their foot off the gas as league top scorer, Liam Delap, came close twice just five minutes later.
First, the number nine found space on the edge of the box and hit a fierce effort towards the bottom corner, forcing Ondrej Mastny into a good save.
Maresca's side then kept the ball alive and once again it was Delap taking a chance on goal, as his second effort - this time inside the United box - was agonisingly blocked on the line by Charlie Wellens.
City continued their hunt for a second, and once again it was Delap leading the pack.
A counter attack allowed Tommy Doyle to slide a neat through ball into the feet of the forward, however his effort from the edge of the penalty area was again saved by Mastny.
Into the second half and once again City started the better side, however it was a piece of individual brilliance the secured our second eight minutes after the restart.
Palmer came inside off the right and fired a stunning effort from 25-yards into the top corner giving Mastny no chance in the United goal.
City's free-flowing attack had been a pleasure to watch all-season long, and Maresca's side were once again in full flow at the Academy Stadium.
A quick, neat move was nearly capped off in style, as Delap fired a thunderous effort from 18-yards, forcing a super save out of Mastny as he tipped the strike onto the bar.
With a comfortable 2-0 lead, many would forgive the City youngsters for taking a step back in the final stages, however as has often been the case this season City did quite the opposite as we added our third.
HOW WE LINED UP
Liam Delap led the line up-front.
WHAT IT MEANS
The victory moves City 11 points clear of second place, Blackburn Rovers who have a game in hand.
Maresca's side can be crowned Premier League 2 champions without kicking a ball, if both Rovers and Tottenham Hotspur fail to win this gameweek.
City return to Premier League 2 action on Friday 23 April as we take on West Ham United away from home at 19:00 (UK).
If both Spurs and Rovers claim victory this week, Maresca and his side can claim the Premier League 2 title with a win over the Hammers.
News about Man City v Man United
Maresca calls for final push ahead of PL2 Manchester derby
Enzo Maresca has urged his players to dig deep in Friday’s derby against Manchester United, which could secure our Elite Development Squad’s (EDS) first Premier League 2 title. Read more.
Palmer: EDS anticipation building as PL2 title edges ever closer
Cole Palmer says the sense of anticipation is building as City’s EDS squad close in on what would be a maiden Premier League 2 title. Read more.
Highlights: EDS 3-0 United
City's Elite Development Squad (EDS) moved one step closer to the Premier League 2 title thanks to a 3-0 victory over Manchester United. Watch more.