It turned out to be an explosive encounter and a fascinating game of tactical chess between Pep Guardiola and Jose Mourinho - and here's how it panned out...
City started as they meant to go on by keeping the ball, passing crisply and finding gaps behind the United midfield. With only three minutes on the clock Kevin De Bruyne found space on the left and his low cross was just inches away from finding Kelechi Iheanacho and Raheem Sterling who were both darting into the six-yard box.
It was the first of many such raids that had United on their heels and struggling to cope with the Blues' inventiveness. Of course, turning possession into goals is the key and on 15 minutes, City deservedly went ahead.
The move began at the back with Aleks Kolarov given plenty of time to play a 50-yard ball up towards Iheanacho who managed to out-jump Eric Bailly and head into the path of De Bruyne who beat Danny Blind to the ball to run clear before drilling a low shot past David De Gea to put City ahead.
The Blues were so dominant that Old Trafford quickly fell silent - bar the singing from the 3,000 City fans - and the Reds were left chasing shadows.De Bruyne and David Silva were bossing midfield with every player contributing and looking comfortable on the ball.
Nicolas Otamendi's clever balls to the forwards were hurting the Reds time and time again but it wasn't until the 36th minute that City finally doubled the lead as De Bruyne worked himself a yard of space in the box before firing a precision shot against the foot of the post with the rebound falling to Iheanacho who had the simplest of tasks to prod past De Gea,
The one thing City didn't want was to give United anything before the break, but a lofted free-kick two minutes before half-time saw Claudio Bravo's attempted catch fall to Zlatan Ibrahimovic who sent a powerful drive into the back of the net.
In that moment, the hosts were back in the game and the first 20 minutes of the second period saw United throwing everything at the Blues.
There were nervy moments when Bravo clashed with Wayne Rooney as both chased a loose ball and Marcus Rashford had a goal chalked off for offside, but in the latter stages the Blues regained control and went close several times through Otamendi, De Bruyne and Silva, but the third goal wouldn't come.
It looked like it had when sub Leroy Sane played in De Bruyne but his low shot struck the inside of the post and rolled across goal and out of play - agonising!
In the closing stages, City counter-attacked at will, but just couldn't kill the game off while United were denied by brilliant challenges from Bacary Sagna and Fernandinho. The host pumped the ball long into the box several times in stoppage time, but John Stones and Otamendi defended like warriors to secure a thrilling derby win.
Key moment: That Sagna tackle...
With five minutes to go, Rooney burst into the box and as he rounded Bravo, Bacary Sagna launched himself with a last-ditch challenge that denied the England captain a certain goal - it had to be inch-perfect and immaculately timed - and it was!
Photo of the match
Man of the match: Kevin De Bruyne
A superb, all-round performance by De Bruyne who scored one, made another and was the heart and soul of the Blues, particularly in the first half. Always available with a tireless work-rate he almost set up three or four more and then struck the inside of the post in the second-half. Fantastic performance by a special player. There were fantastic performances all over the pitch with special mentions for Otamendi, Nolito, Silva and Fernandinho all excellent and contenders for the award.
What it means
City make it six wins out of six and maintain a 100% Premier League record. It also gives the Blues a three-point advantage over United early on in the campaign, though there will be some tired legs against Borussia Monchengladbach on Tuesday...
Stats and milestones
>This was City's 50th derby win over United....
>This is City's best start to a season - ever.
>This was Jose Mourinho's first loss as Manchester United manager.
>City - as expected - edged the possession 60% to United's 40%.
>This was the Blues' fourth win in six games at Old Trafford.
>This is Pep Guardiola's best start of his managerial career
Tweet of the day: David Silva
This victory is for all of our fans, we win together, we fight together, our club, our city!! pic.twitter.com/iPGpNR0qSH— David Silva (@21LVA) September 10, 2016
Press quote: Oliver Holt, Mail
"That is what we came to Old Trafford to do on Saturday. To be blinded by the light. To gaze at the lightning that crackled and fizzed when Jose Mourinho collided again with Pep Guardiola. To wonder at this meeting of the Premier League’s two behemoths who are both hell bent on domination and spending to prove it.
And we were not disappointed."