After City needed an injury-time header from John Stones to beat bottom club Wolves 2-1 in the early kick-off on Sunday, Liverpool answered with a composed performance at Anfield to hand Chelsea their first league loss since the opening round.
Having seen third-placed Arsenal lose at Bournemouth on Saturday to raise questions about the Gunners' title hopes, Liverpool and City took full advantage 24 hours later to build a small gap atop the standings.
John Stones gets congratulations from a laughing Jack Grealish after his winner at Wolves. (AP PHOTO)
Arne Slot's Liverpool now lead on 21 points from eight games, one ahead of Pep Guardiola's City and four ahead of Arsenal.
Curtis Jones orchestrated the win for Liverpool, earning a penalty for Mohamed Salah's first-half opener and then scoring himself to restore the host's lead in the 51st minute, shortly after Nicolas Jackson had equalised for Chelsea.
Jones also thought he had earned a second penalty in first-half injury time, but it was overturned after a VAR review judged Chelsea goalkeeper Robert Sanchez got the ball before bundling over the Liverpool player.
But Jones capped a stellar performance by beating the offside trap to get on the end of a ball into the box from Salah and slot in the winner.
Liverpool were the last team other than City to win the title, back in 2019-20, and pushed them close several times under Jurgen Klopp before finishing just fifth two years ago and a distant third last season.
But in Slot's first season in charge, the Reds look like credible challengers again and have now won 10 of 11 games in all competitions.
City, without their injured linchpin Rodri, are looking far from unbeatable, needing another last-gasp goal from Stones to avoid a third league draw in four games against a Wolves team with only one point so far.
It also needed a VAR intervention for the goal to stand, as referee Chris Kavanagh was called to the sideline monitor to review whether Bernardo Silva was interfering with goalkeeper Jose Sa from an offside position.
"We are not used to winning games at the end," said Guardiola, whose team have won four straight titles by regularly overwhelming most opponents. "It is a good flavour for us."
It also extended City's unbeaten streak to a club-record 31 league games, beating a mark Guardiola's team had set in 2018.
With prolific striker Erling Haaland scoreless for a third straight league game, City's defenders provided the goals instead after Jorgen Strand Larsen had given the hosts a surprising early lead in the seventh minute.
Josko Gvardiol curled in a superb right-foot shot from outside the area to equalise in the 33rd minute but Wolves then repelled wave after wave of City attacks before the late intervention from Stones, who also netted a last-gasp equaliser against Arsenal in the eighth minute of injury time last month.
"These moments don't come often for us," Stones said. "We've come up with a few over the years and today was one of them."
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