Entering Friday evening's contest off a 6-1 drubbing from Kiwi rivals Auckland the week prior, and winless in their past four games, the Phoenix suffered their ninth defeat of the campaign at Sky Stadium thanks to Marco Tilio's 51st minute strike.
It left them rooted in 11th place on the table.
They came agonisingly close to tying things up in the 68th minute when Corban Piper sent a bullet header towards goal at close range, only for Patrick Beach to deny him with one of the best saves in ALM history.
And now with his side at risk of falling more than 10 points off the playoff race by the time the weekend is done, a glum Italiano acknowledged that the defeat could prove telling.
"Tonight was like a mini grand final," he told Sky Sport NZ.
"Even the game before [against Melbourne Victory] we needed to win, it was a six-pointer, so we've lost two of those.
"There's always hope, I still think we can put a run of games together.
"But this result makes it a lot harder."
A banner calling for Italiano's sacking was unveiled by a small group of fans pre-game.
The Phoenix will play five of their last eight games across the Tasman, with pivotal trips to face Western United and Sydney FC to come in the next fortnight.
"It might be one of those ones where it's too little too late now," Phoenix skipper Alex Rufer, who started his first game since December after an illness, told Sky Sport.
"We need to win eight games, every game from now."
Conversely, after entering the evening sixth on the table, the congested ALM playoff picture meant City were able to supplant second-placed Adelaide on goal difference with the win, issuing a challenge to their top-six rivals ahead of their weekend fixtures.
Aurelio Vidmar's side laboured in search of a breakthrough in the opening half but came out with guns blazing in the second and soon found a breakthrough, with Tilio continuing to find form since returning from a long injury layoff by netting his second goal in as many weeks.
"It's been 12 months since I played three consecutive games, so I'm really happy I've got through," the injury-plagued Socceroo told Sky Sport.