Mikel Arteta had scored an 87th-minute winner for the Gunners and it seemed the wheels had well and truly fallen off the Blues’ title challenge.
BBC Sport’s Chief Football Writer Phil McNulty wrote: “The credits now appear to be rolling on City's attempts to win the battle for Premier League supremacy in Manchester…”
The 1-0 loss left the Blues eight points behind Manchester United with only six games to go and the patchy form on the run in had seemingly delivered a mortal blow to hopes of a first top flight triumph in 44 years.
Balotelli was banned and many believed Roberto Mancini would never play him again, but as one door closed another one opened and Carlos Tevez, exiled for much of the season after a spat with the manager, would now have a huge part to play in the games that remained.
Just five points from a possible 15 for a nervy City had seen United surge clear and the Reds knew that they now needed just three wins to seal the Premier League title from their remaining six games – one of which was the Manchester derby at the Etihad three games from the end of the campaign.
For City fans, the thought that United could actually be crowned champions at the Etihad would be the cruellest scenario of all.
But Mancini insisted it was not over.
All City could do was keep believing and try and win the games that remained. In many ways, the Arsenal defeat seemed to ease the burden pf expectation the players had been carrying around with them in the previous few months.
The thought that it would be they who ended the long wait for glory had weighed heavy for so long.
Both Manchester clubs had midweek games to play on the same night. City hosted West Brom and United travelled to struggling Wigan Athletic.
The Blues needed an instant pick-me-up, and that’s exactly what they got.
After racing into a 4-0 lead over West Brom and inspired by the excellent Tevez, the game was wrapped up just past the hour and meanwhile, news had filtered through that United had gone behind to Shaun Maloney’s 50th-minute goal.
By full time, City had declared at four and confirmation filtered through that United had lost to Wigan – almost unthinkable. The gap was back to five points with five games to go.
The fixtures had fallen kindly for the Blues and if they were to put pressure on United with the next fixture away to Norwich falling 24 hours before the Reds next played, they had to win.
City were irrepressible at Carrow Road, playing scintillating football that blew the Canaries away and, again inspired by a superb Tevez performance, won 6-1 with Tevez grabbing an unforgettable hat-trick and Aguero bagging a brace.
The gap was back to two points, but United didn’t falter in the next day, beating Aston Villa 4-0 at Old Trafford to reclaim a little breathing space.
The next round of games saw United play first against Everton while City kicked off later in the day away to Wolves.
The Toffees took the lead on 33 minutes against United, who responded with three goals in 20 minutes to look home and hosed with an hour played. Marouane Fellaini pulled another back for Everton but Wayne Rooney’s second shortly after seemed to have snuffed out any comeback.
United still led 4-2 with 83 minutes played, but the title race was about to receive an almighty twist as the Toffees dramatically scored twice in three minutes to claim a 4-4 draw. Incredible stuff.
City still had work to do, but in truth the 2-0 win that relegated Wolves was comfortable enough with Aguero and Samir Nasri scoring a goal in each half. It was focused and professional.
The gap was down to three points, City had a better goal difference and suddenly held all the aces.
The scenario was simple: beat United at the Etihad in eight days’ time and the impossible would suddenly be very possible – City would go top.
No wonder they called it the biggest Manchester derby of all time.
The anticipation was huge, the tension palpable. In many ways, it felt like it would winner take all – if United won it would surely be all over and a draw would do little for the Blues’ aspirations. It was win or bust.
After what had seemed like a wait that had lasted forever, the game finally began and the battle of Manchester ensued.
The tackles flew in, the football was tense and scrappy but with so much at stake, this was never going to be one for the purist.
Seeming as though the first half would end goalless, the Blues won a corner in first-half injury time and as the ball came in, Vincent Kompany rose higher than anyone else to power home a header and send the Etihad Stadium wild with delight.
It just had to be the skipper, didn’t?
It proved to be the only goal of a game City deserved to win and the Premier League table now showed the Blues at the top with just two games left, six points and the title would be City’s.
Just the small matter of Newcastle United away and QPR at home…
Few doubted the sternest test would come at St James’ Park with the Magpies keen to end their home campaign with a notable scalp of City.
It would be a game not for the feint-hearted as the bookings stacked up on either side and with 70 minutes played, the scores were still level at 0-0.
Then, Yaya Toure caught sight of goal and from 20 yards curled a superb shot into the right-hand side of the Newcastle goal – the City fans went crazy and the Blues were almost there.
Yaya sealed the win with a second goal a minute from the end to calm the nerves somewhat and the realisation set in that if the Blues beat QPR, that would be it.
United beat Swansea 2-0 meaning they could still be champions if City stumbled at home to QPR and they won at Sunderland.
It seemed straightforward on paper, but who could have guessed the drama that was about to happen on 13 May, 2012…?
And of course, Mario, back from the cold and on as a sub for Tevez on 75 minutes,still had a small but vital part still to play in the title race - who would have thought that as he traipsed off at the Emirates Stadium a month earlier?