The visitors did well not to lose by a wider margin after being reduced to ten men following a mistimed challenge by Joey Barton.
Reds boss Rafael Benitez issued a rallying call before the game to fight for more Premiership points after a disappointing Champions League loss to Benfica earlier in the week.
And Liverpool dominated from the outset with some well-crafted build-up play.
Benitez introduced Jan Kromkamp and Daniel Agger into the line-up but it didn't affect the team's chemistry with the pair linking up well on the counter-attack.
Harry Kewell wasted an opening in the box by bringing the ball down for a left-footed shot instead of hitting it on the volley.
And Sami Hyypia was unlucky not to score with a glancing header from a trademark Steven Gerrard free-kick which he headed down past David James and wide of the post.
Liverpool were on the verge of becoming victims of their own success, clinging to possession as the game stagnated in midfield. Play after play fell apart as Liverpool tried one pass too many.
Dietmar Hamann replaced Xabi Alonso after the Spaniard came off second best in a clash of heads with Barton. But City still struggled to break out of their half.
Liverpool managed to break the deadlock on 40 minutes with a text-book counter-attack.
Gerrard collected the ball on the halfway line and without looking up placed a deft ball beyond the last defender for Kewell.
The Aussie star relished his one-on-one against James and charged full speed at him before calmly tucking the ball away in the right corner.
After the break City grew frustrated at their lack of possession as the game became more physical. Georgios Samaras was warned by referee Dermot Gallagher after flooring Hyypia in a mid-air collision and moments later City were reduced to ten men when Barton received a second yellow card for stamping on the Finnish defender.
However the disadvantage made City work harder and Trevor Sinclair gave the travelling fans something to cheer about. Wearing a Phantom of the Opera style facial protection mask he picked up the ball on the edge of the area and moved in on goal.
He fired a rocket shot towards the top corner which produced one of Pepe Reina's finest saves this season.
Benitez substituted Peter Crouch to a chorus of boos from the Kop as he proved to be Liverpool's most consistent goal threat.
The giant striker was unfortunate not to get on the scoresheet with a cheeky back-heel which rolled past the goal and another curling shot that came back off the crossbar.
The Reds continued to throw everything forward for the last 15 minutes but the ball would not bounce well for them or was broken up by City's hardened defence.