Sir Alex Ferguson's men had temporarily gone 18 points clear at the top after Titus Bramble's 27th-minute own goal gave United a 1-0 win over sinking Sunderland in the lunchtime kick-off at the Stadium of Light.
But City responded by doing their bit with Carlos Tevez and David Villa giving Roberto Mancini's men the first-half advantage before Vincent Kompany and an own goal from James Perch completed their easy win.
Rafael Benitez saw his hopes of steering Chelsea back into the Champions League suffer a serious blow as Southampton claimed another prize scalp.
Rickie Lambert's 35th-minute free-kick proved enough to seal a 2-1 win at St Mary's after an early opener from Jay Rodriguez had been cancelled out by a header from John Terry.
Chelsea's shock loss allowed Tottenham to leapfrog into third place with a 2-1 win at Swansea, while Arsenal narrowed the gap behind them to just two points after crushing Reading 4-1.
Mauricio Pochettino's men gave their survival prospects a might boost as they clung on for the points thanks to a superb save from substitute keeper Kelvin Davis to deny Victor Moses.
Former Chelsea boss Andre Vilas Boas watched another superb display by Gareth Bale inspire Spurs to a valuable win in Wales.
Bale set up Jan Vertonghen for his seventh minute opener then flicked home a superb 21st-minute effort to increase his side's lead. Michu had given Swansea hope with a 71st-minute header.
Nigel Adkins' debut as Reading boss turned out to be one to forget as his side were sunk by resurgent Arsenal and dropped to the bottom of the table on goal difference.
Gervinho opened the scoring after 11 minutes and Santi Cazorla and Olivier Giroud increased the Gunners' lead before Hal Robson Kanu gave the visitors a glimmer of hope in the 68th minute.
But Arsene Wenger's men sealed their win in the 77th minute when Adrian Mariappa fouled Alex Oxlade-Chamberlain in the box and Mikel Arteta stroked home the resulting penalty.
Roberto Martinez's Wigan moved out of the relegation zone thanks to a potentially priceless late strike from Aruna Kone to beat Norwich 1-0 at the DW Stadium.
Wigan had laboured for much of the game but Kone fired his 10th goal of the season with nine minutes left to give his side a huge boost in their battle to avoid the drop.
Andy Carroll scored twice as West Ham eased their own relegation fears with a 3-1 win over West Brom at Upton Park.
Carroll headed a 16th-minute opener and after Gary O'Neil made it 2-0 Carroll added his second after 80 minutes.
Graeme Dorrans pulled one back for Albion from the penalty spot before Youssouf Mulumbu was sent off in injury time for an angry reaction to a refereeing decision.
In the late kickoff, Everton kept alive their faint hopes of a top-four finish after Kevin Mirallas' fine individual effort helped them to a 1-0 win over Stoke.
Saturday's Barclays Premier League Results