The reigning champions took a first half lead in controversial circumstances through Maren Mjelde’s penalty after Ellen White was adjudged to have handled the ball.
However, TV replays showing the ball had instead struck Demi Stokes below the elbow and our hopes of staging a fightback were then dealt a further blow when Sam Kerr doubled the Chelsea advantage 12 minutes into the second half.
But Frank Kirby sealed the deal for the hosts by firing home 11 minutes from time.
With City and Chelsea having served up a host of classic clashes down the years there was expectation and excitement aplenty ahead of kick-off.
Not surprisingly given the stellar quality on show from both squads, there was intent and intensity on display in abundance right from the get-go.
Though the hosts enjoyed the lion’s share of early possession, City too looked a potent threat going forward with Chloe Kelly’s pace and ambition a thorn in Chelsea’s side.
City were indebted to a diverting block from Gemma Bonner on 15 minutes which deflected Pernile Harder’s goal bound effort wide before Sam Kerr fired over from the resulting corner.
Harder then unleashed another rasping shot with Ellie Roebuck – making her 50th WSL appearance – was happy to see go over.
But City then came within a whisker of breaking the deadlock as Sam Mewis was denied by the Kingsmeadow woodwork.
The American World Cup winner first showed her class by seizing possession midway in the Chelsea half before then illustrating her pace and power, driving at the hosts defence before drilling in a low shot which smacked the bottom of the post.
Given both sides’ approach it seemed a goal was imminent – and it duly arrived on 35 minutes amidst huge controversy on 35 minutes as Chelsea were awarded a penalty in contentious circumstances.
The England striker vehemently protested her innocence and replays appeared to show that the ball hit Stokes under her elbow.
However, the decision stood, and Maren Mjelde stepped up to send Roebuck the wrong way.
With City aggrieved, Chelsea then threatened to double their advantage via a spot of frantic pinball in our area and it needed a brave block by Jess Park to keep out Kerr’s goal bound strike.
Gareth Taylor’s side sought to make a rapid response after the break but instead it was Chelsea who began the stronger.
First Cuthbert drilled a low shot perilously close before City were grateful that unmarked Kerr could only head over from Fran Kirby’s inviting cross.
The champions then squandered a gilt-edged opportunity as Cuthbert blazed a shot wide after stealing round Bronze.
However, Chelsea were not to be denied and their pressure yielded a second goal on 57 minutes.
Ji found Kirby on the right flank with a fine long-range pass and this time Kerr made no mistake from his pin-point cross.
City needed a response and it arrived via our own penalty on 72 minutes.
Bright was correctly adjudged to have handled Caroline Weir’s cross and Kelly made no mistake to give City renewed hope
But with 11 minutes left, Kirby sealed the victory for the hosts as she latched on to a fine through ball and rounded the onrushing Roebuck before firing home.
How we lined up
What it means
The result leaves City in fifth place in the table on seven points, five adrift of joint leaders Arsenal and Everton.
City are back in FA Women’s Super League action next Sunday when we travel to take on Reading FC.
Kick-off at the Madejski Stadium is 2pm.