However, an added time penalty from former City man Cole Palmer earned the hosts a 4-4 draw on a highly entertaining afternoon in west London.
Erling Haaland had opened the scoring from the spot in the 25th minute before Thiago Silva equalised for Chelsea just four minutes later.
The hosts took the lead thanks to Raheem Sterling soon afterwards but Manuel Akanji’s header had the sides on level terms at half-time.
Our third came very early in the second period, with Haaland sliding the ball home for his 49th Premier League goal in just 47 appearances.
Nicolas Jackson scored Chelsea’s third before the very late drama at both ends of the pitch.
Our first draw of the season leaves us one point ahead of Arsenal and Liverpool at the top of the Premier League table.
After an impeccably observed sounding of the Last Post on this Remembrance Sunday in the UK, it was a relatively quiet start to the game compared to the action that would follow.
We had our first major chance of the day midway through the half after a sweeping move down the left ended with Erling Haaland knocked to the floor by Marc Cucurella while trying to meet Bernardo Silva’s cross.
Referee Anthony Taylor awarded a penalty and a lengthy VAR check ensued before the Norwegian had his chance to convert.
The delay and Palmer’s attempt to scuff the spot didn’t affect our striker, who duly sent Chelsea goalkeeper Robert Sanchez the wrong way.
The lead only lasted four minutes however, with Thiago Silva glancing a header from a Chelsea corner to equalise for Mauricio Pochettino’s side.
Haaland came within inches of restoring City’s advantage shortly afterwards when a mazy Phil Foden run and floated right-footed cross dropped just beyond the backpost.
Haaland reached for it with his left boot but the angle was just too tight for our man to squeeze it home.
Foden was at the heart of things for City and thought he had scored our second himself in the 34th minute.
Our Academy graduate received the ball in the inside right position and set it outside of the far post but it didn't have quite enough bend to come back inside the post.
Instead it was Chelsea who scored next, when James pounced on a slack Gvardiol touch to cross for a simple Sterling tap in.
Ruben Dias had to be aware soon afterwards when an Enzo Fernandez strike looked set for the bottom corner without an intervention from the Portuguese defender.
Haaland had another huge opportunity before our eventual second, latching on to Bernardo Silva’s through ball and firing low and hard only for a strong Sanchez hand to palm the ball away.
Instead it was Manuel Akanji who provided the equaliser, nodding a dinked Bernardo cross into the top corner a few minutes ahead of half-time. After only one goal in his first campaign at City, the Swiss defender has now scored three goals in his last five games.
Alvarez supplied Foden before the England international waited for the overlap to return the ball to the Argentinian. Alvarez drilled the ball across the box and a sliding Haaland bundled the ball over the line and ended up in the net with it.
The goal didn’t change the tempo of the game, with both sides attacking in numbers.
Doku could have doubled the advantage just before the hour mark but Sanchez closed his legs on the winger’s low shot.
Ederson was forced into a brilliant smother soon after when Palmer weaved his way through the defence and poked towards goal. The Brazilian goalkeeper was lightning quick to come off his line and narrow the angle for the former City man.
The next shot came within two minutes and this time it was Foden who was denied by Sanchez, forcing the Spaniard to dive low to his left.
Chelsea had their third at the midway point of the second half when Nicolas Jackson reacted quickest to an Ederson save to poke the rebound under our No.31.
Chelsea substitute Malo Gusto would have expected to put his side back in the lead around 10 minutes later but he scooped his left footed shot over the bar.
It seemed we had a winner in the 86th minute when Rodrigo fired at goal from 25 yards.
Thiago Silva dangled a leg in the way of the midfielder’s effort but only succeeded in directing it to the opposite side of the goal it was originally destined for.
Subs: Ortega Moreno, Carson, Phillips, Nunes, Bobb, Lewis
CHELSEA XI: Sanchez, James (C) (Gusto 64), Disasi, Silva, Cucurella, Fernandez (Mudryk 64), Caicedo (Broja 90), Gallagher, Palmer, Sterling, Jackson
Subs: Petrovic, Maatsen, Badiashile, Ugochukwu, Madueke, Matos
Pep Guardiola reaction
"It was a good advert and entertaining game for the Premier League and both teams wanted to win. I wouldn't have expected differently Chelsea have a fantastic team and players.
"And we know they always play good against fantastic side. We took the game [to Chelsea] it was difficult to control and they had quality from Cole Palmer and Mykhailo Mudryk.
"The players to dribble and run it was difficult to control the game - they were aggressive."
"We have momentum [during the game] two or three transitions one-on-one which we could not finish, but the game was in the moment at the end.
"A tight game, but a fair result. I congratulate the team, we go into the break and we qualify for the Champions League and we comeback [after international break] and go."
On whether he preferred a 1-1 result: "It is, what it is. I prefer to win 7-0 but it is not happening at that level they [Chelsea] are fantastic team.
"I do not know the average [attempts on goal] but at the end both teams tried to do it and do what they needed to do."
"We feel exhausted to be honest.
"These type of games, with that rhythm. We knew how tough it is to come here. The team they’ve built.
"They have great players, they signed massive players. The level of their team has risen.
"So we knew where we were coming. I don’t think it was one of our best performances today.
"I think individually, we need to look more at ourselves because conceding four goals is not normal to us.
"At the same time, we keep pushing. Sometimes football is like this, we have to move forward. We have to correct some mistakes."
Man of the match
Phil Foden – The 23-year-old is enjoying his football at the moment and it shows.
Our Academy graduate is a bundle of energy off the ball and has a first touch that makes him the perfect outlet wide on the right.
While he often moves quickly in tight spaces, it was a brief pause and a perfectly weighted pass for Julian Alvarez that teed up the Argentinian to cross for City’s third.
In such an entertaining, high-octane game, Foden’s class was crucial in City scoring four times.
What it means
City have 28 points from 12 matches in the Premier League. This was our first draw of the 2023/24 season.
We have a one-point lead at the top of the table with Arsenal and Liverpool in second on 27 points.
The November international break means City won’t play again until Saturday 25 November when Liverpool visit the Etihad Stadium.
Our players will now join up with their national sides and are expected to return to the City Football Academy in the middle of the week commencing 20 November.