Brilliant individual efforts from Liam Delap and Sam Edozie, plus James McAtee’s close range finish had City three goals to the good with 18 minutes remaining in an even contest between the division’s top two teams.
The visitors set up a tense finale when Max Woltman crashed home shortly after Tom Hill’s superb 20-yard drive, but captain Cole Palmer allayed any fear of a Liverpool fightback when he added our fourth in the dying minutes.
With swirling wind battering Merseyside, City got off to a flying start when Delap’s power and pace left three defenders in his wake before he fired into the bottom corner to finish a run that started inside his own half.
Edozie made it two on the half hour mark.
Turning Reds’ right-back Conor Bradley inside out, he found half a yard in a crowded penalty area before hitting an unstoppable drive in off the underside of the crossbar.
But the hosts remained very much in the game, despite the wind being in City's favour.
There was relief when Fidel O’Rourke’s tap in was ruled out for handball after he’d followed up on his fierce 18-yard shot that was parried by Cieran Slicker.
He then turned provider, picking out James Balagazi at the far post, but CJ Egan-Riley put his body on the line to make a crucial block.
Delap might have made it three before the break, but for the intervention of Reds’ centre-half Remi Savage and, playing with the wind in the second period, Liverpool went all out to get back into the game.
Niall Brockwell dragged wide from a promising position, whilst Hill blazed over the bar when the Merseysider’s pressing hounded Josh Wilson-Esbrand out of possession on the edge of the City area.
Tempers soon began to fray, the magnitude of the game made evident by an increasing number of full-blooded challenges which saw the referee issue seven yellow cards.
Amongst that, Liverpool continued to make better use of the wind advantage, but City's threat on the counter-attack steadied the ship somewhat.
Edozie had already fired straight at the keeper from one lightening break, before he scampered down the left and squared for substitute James McAtee to score what felt like the goal to effectively end the contest.
But, the hosts had other ideas.
Hill smashed into the top corner two minutes later, before Woltman crashed home a loose ball from 10-yards.
It had a galvanising effect, but Palmer showed a calmness that belied the nerve-jangling finale to hit City's fourth.
Dancing past the keeper, he tapped into the unguarded net to wrap up a crucial three points with his 21st goal of the campaign.
How we lined up
Gareth Taylor made three changes to the side that beat Reading in the U18 Premier League Cup semi-final last weekend, with Taylor Harwood-Bellis, Wilson-Esbrand, and Alex Robertson coming into the starting XI.
Slicker’s goal was protected by a back four of Egan-Riley, Harwood-Bellis, Finley Burns and Wilson-Esbrand.
What it means
Victory stretches City's unbeaten run to 13 games in all competitions and our lead over Liverpool at the top of the table to nine points, with six fixtures remaining.
The Reds, however, have two games in hand and would reduce the deficit to three points if they win both.
We host Blackburn Rovers in the U18 Premier League at the City Football Academy next Saturday, 29 February, with kick-off at 11:00 (UK).
Four days later our FA Youth Cup campaign resumes, as we face Burnley at home, with a place in the last four at stake.