There were seven match-winning saves from the man fighting to regain the England number one spot.
Watching England manager Sven Goran Eriksson will no doubt have been very impressed by James' performance.
Five times in the space of seven first-half minutes James pulled off excellent stops.
After 34 minutes Damien Duff wriggled through the City defence and drilled a low drive towards goal. James did well to stop the shot although it spilled to Mateja Kezman. The Serbian frontman, however, whacked the ball wide of goal from three yards out.
Two minutes later, James produced an acrobatic leap to tip the ball over the crossbar from Eidur Gudjohnsen's powerful header from a Frank Lampard corner.
After 38 minutes a double save, the first from Kezman and the second from Lampard, prevented the Premiership leaders from scoring first.
Then a minute later William Gallas powered a header towards goal. Paul Bosvelt chested the ball off the line before James got a hand on it and cleared the danger.
Seconds later City had their best chance of the game, when a quick counter-attack saw Shaun Wright-Phillips jink down the byline before crossing to Robbie Fowler. With John Terry slipping, Fowler had the easiest of chances to score but screwed his low, diving header wide off the post.
The second half had more of the same.
City defended well and James continued his marvellous one-man act.
The ex-West Ham shot-stopper tipped away for a corner a low drive from Duff, with Gudjohnsen ready to pounce at the far post on 54 minutes.
Again James was called into action - this time on 75 minutes, when the England star had a bit of luck to kick away a fierce free-kick from Lampard.
But James saved the best until last - and what a save it was.
Deep into injury time James produced a miraculous diving save to parry away a right footed drive from Lampard which had goal written all over it.
Chelsea's dropped two points means they are now just nine points clear at the top of the Premiership.