Despite taking the game to the hosts in the opening stages, City – who were twice denied penalty appeals after the ball appeared to strike Trent Alexander-Arnold’s arm - were rocked on our heels by early strikes from Fabinho and Mo Salah.
And the task in hand then got even tougher when Sadio Mane extended Liverpool’s lead six minutes into the second half.
Bernardo Silva struck on 78 minutes to reduce the arrears but despite applying sustained late pressure with Kyle Walker and Gabriel Jesus both going close, City were unable to mount a dramatic late comeback.
City made a positive start, dominating both possession and territory - yet we found ourselves two goals down inside the first 15 minutes as the hosts demonstrated a clinical cutting edge.
John Stones was frustrated after not making better contact with a dipping Kevin De Bruyne corner and Sergio Aguero and his colleagues then appealed in vain for a fifth minute penalty after the ball appeared to hit Alexander-Arnold’s arm inside the box, but referee Martin Oliver and VAR were both unmoved.
A minute later, the ball was at the opposite end of the field and Liverpool were ahead with their first meaningful attack.
As the hosts pressed down the left, City only partially cleared the ball and, after seizing possession, Fabinho fired in a powerful 25-yard shot inside the right hand upright.
In a frantic first 10 minutes, City then spurned an excellent opportunity as Raheem Sterling could only divert a header wide at the near post after meeting De Bruyne’s inviting cross.
However, the champions then suffered a body blow as Liverpool struck once more in the 13th minute.
Liverpool full back Andy Robertson found a pocket of space on the left channel and surged forward before whipping in a curling left-wing ball which evaded the City defence but found the onrushing Mo Salah who headed across Claudio Bravo into the left-hand corner of the goal.
City sought to regain our collective composure and a superb move from deep in our box saw Aguero sting Alisson’s palms with rasping 15-yard drive.
Staying on the front foot, Angelino was then an ace away from narrowing the deficit on the half hour, the left back desperately unlucky to see his deflected effort strike the foot of the past after a wonderful give and go with De Bruyne.
Aguero then came within inches of scoring as City powered upfield once more, but having latched onto superb De Bruyne ball, Kun saw his 18-yard effort fly agonisingly wide.
The action continued right on half-time as Bravo produced a stunning save to deny Salah’s curling first time strike as Liverpool staged another rapid counterattack.
City came out targeting an instant response. Instead it was the hosts who further strengthened their grip on the match as they claimed a third goal on 51 minutes.
Jordan Henderson evaded two challenges on the right flank before delivering an out-swinging cross which found Sadio Mane lurking at the far post to head past Bravo inside the near post.
Sterling sought to summon up a response, superbly weaving inside the Liverpool box only to see his snap-shot blocked and deflected over.
But our endeavours were finally rewarded on 78 minutes when Bernardo Silva swept home a superb low drive to give the Blues renewed hope of a late fightback.
Tough one to take. We’re sorry to the traveling fans and thanks a lot for your support today. We’ll fight until the end! 🔵🔵 pic.twitter.com/gtZfusHnWw— Bernardo Silva (@BernardoCSilva) November 10, 2019
With Liverpool suddenly nervous, Sterling and City were denied another penalty appeal after the ball again struck Alexander-Arnold's arm.
But the Blues were unable to turn that pressure into more tangible reward as full time sounded on a hugely frustrating afternoon on Merseyside.
City: Bravo, Walker, Fernandinho (c), Stones, Angelino, Rodrigo, Gundogan, De Bruyne, Bernardo, Aguero, Sterling
Subs: Carson, Cancelo, Otamendi, Silva, Mahrez, Foden, Jesus
Liverpool: Alisson, Alexander-Arnold, Lovren, Van Dijk, Robertson, Fabinho, Wijnaldum, Henderson, Mane, Salah, Firmino,
Subs: Adrian, Milner, Keita, Gomez, Oxlade-Chamberlain, Lallana, Origi.
What it means
Liverpool stretch their lead at the top to eight points from second-placed Leicester and Chelsea and are now a further point clear of City who stay in fourth place in the Premier League table.
City now take a fortnight’s break from action as the November international break takes centre stage.
Pep Guardiola’s side are next in action on Saturday, November 23, when we play host to Chelsea in the Premier League.
Kick-off at the Etihad is 5.30pm with the game being televised live on Sky Sports.