The keeper, cruelly nicknamed Calamity James for his error-prone career, produced another howler in the 76th minute when he failed to hold a high cross from Lee Clark under pressure from Brian McBride and allowed Luis Boa Morte to secure a point for Fulham.
Amid taunts of 'You'll never play for England' from the home supporters, James earlier denied Fulham twice with stunning saves, but once again his failure to deal with high balls cost him – and City dear.
City took the lead in the 20th minute when Claudio Reyna scored. The American midfielder, booed by home fans for turning them down in favour of joining City from Sunderland two summers ago, stabbed the ball past Edwin van der Sar from close range after the Dutch goalkeeper could only parry Antoine Sibierski's diving header from Robbie Fowler's cross.
Fulham almost equalised with what would have been the own-goal of the season from Paul Bosvelt, who diverted Moritz Volz's cross towards goal with such power that James had to dive full stretch to keep the ball out of the top corner.
James made an even better save in first-half stoppage time when Steed Malbranque set up Boa Morte for a low shot that the keeper did well to tip on to the far post and away for a corner.
Boa Morte was full of lively running and nutmegged Richard Dunne, who was otherwise solid in City's defence and effectively nullified the threat of Andy Cole. When the former Manchester United striker was given a sight of goal but blazed his shot well wide, five minutes into the second-half, City's fans howled with delight.
Fowler was just as wasteful minutes later when he shot wide from close range after being given the ball by an uncharacteristically inaccurate pass from Malbranque. Within five minutes, Fowler was replaced by Shaun Wright-Phillips, making his first appearance since having knee surgery six weeks ago.
Chris Coleman also made changes, replacing Cole with Collins John and sending on Tomasz Radzinski for Malbranque, and within five minutes Fulham were level.
As so often in the past, James looked uncomfortable when asked to deal with Clark hoisted ball into the box. McBride jumped legitimately to challenge James, who dropped the ball for Boa Morte to drill it back past him and into the net.
Even then, both teams had chances to win, with City winger Kiki Musampa shooting high over the bar and Radzinski volleying wide at the other end.
A draw was a fair result but did little for either manager. Coleman knows his side need another few points to be absolutely safe, while Pearce still needs wins to secure his job for the long term.
Man of the Match: Richard Dunne
The Republic of Ireland international was once again in impressive form in the middle of City's defence. He snubbed out the threat posed by Andy Cole so effectively that Fulham's dangerman was substituted 20 minutes from time.