The victory means City will end the night in the top four, four points behind leaders United with a game in hand.
Brighton’s compact formation frustrated City in the early exchanges with only a chance for Kevin De Bruyne on 14 minutes worthy of note.
Ilkay Gundogan played the skipper in but with just Sanchez to beat the Seagulls keeper stood firm and beat the shot out.
But the lowly visitors caused one or two problems at the other end with a couple of dangerous counter-attacks.
Riyad Mahrez was looking in majestic form on the right flank, with some of his passing and deft touches a joy to watch.
It took a piece of brilliance from Foden to finally break the deadlock, with De Bruyne’s pass taken in the youngster’s stride as he cut past one challenge on the left before placing a low shot unto the bottom left-hand corner of the net.
It was his eighth of the season, placing proudly as our top scorer so far this campaign.
City continued to dominate large portions of the game after the break and just before hour-mark, Bernardo came agonisingly close to doubling the lead as he collected a loose ball in the box, nutmegged a defender before shuddering the woodwork with a powerful drive.
Then Mahrez was put clear but the Algerian’s low angled shot whistled past the post.
The missed chances allowed the visitors to grow in belief that they could take something out of the game and as play stretched, the Seagulls looked more threatening.
City looked increasingly tired in the last few minutes with uncharacteristic mis-placed passes inviting pressure from Brighton who finished strongly.
But in added time, De Bruyne latched on to a poor throw-in and Sanchez pulled the Belgian down for a stonewall penalty.
Raheem Sterling stepped up and blazed the spot-kick over the bar - but City held on for a very hard-earned victory.
Foden’s trails of the unexpected
Players with Phil Foden’s ability only come along once in a blue moon.
He always seems to be able to unpick the most stoic of defences by thinking outside the box.
City have plenty of options in the creativity department, but Foden just seems capable of the unusual, with his range of finishing making him an unpredictable force for those defending against him.
At 20 and with almost a century of appearances under his belt, he is only going to get better – a frightening prospect for any team he lines up against.
STAR MAN: phil foden
Energy, invention and hard-work - not to mention a clever goal.
"No matter if you are a top side or if you have the quality of players we have, when you are up against the personality and courage that Graham Potter’s team it always will be difficult - we knew it, so we did a really good last 15 minutes of the first half when we played a lot of passes.
"We created five or six clear chances to score - and they are a really, really good side.
"It was the best thing that could happen to us today, struggling in the last 10 or 15 minutes of the game. I'm pleased for the effort because we have won four games in a row - now for Palace."
WHAT IT MEANS
Ahead of Spurs' game against Fulham, City move up to third in the Premier League table with a game in hand over leaders United and second-placed Liverpool.
City are home again this coming Sunday with Crystal Palace the visitors at the Etihad – kick-off is 7.15pm.
Brighton: Sanchez, Webster, Dunk, Burn, Veltman, White, Propper (March 68), Bernardo, Tau (Maupay 68), Mac Allister, Trossard (Khadra 86)
Subs: Gross, Zeqiri, Walton, Sanders, Jenks, Weir
News about Man City v Brighton
City 1-0 Brighton: Extended highlights
Extended action from the Etihad... Watch more.
City 1-0: Brighton: Short highlights
The best of the action from our home game with Brighton... Watch more.
City 1-0 Brighton: Full-match replay
Enjoy the full 90 minutes of City's crucial Premier League triumph over Brighton on CITY+ Watch more.
Guardiola: That was just the test we needed
Pep Guardiola pointed to the rock-solid qualities of City’s defence as a defining factor in our 1-0 win over Brighton. Watch more.