The Gunners dominated proceedings and came away with a thoroughly deserved victory courtesy of a brilliant Mikel Arteta goal with three minutes remaining.
The win allowed Arsenal to move two points clear in third position to give themselves every chance of finishing in a Champions League position whilst City, who finished the game with ten men after Mario Balotelli was again sent off, fell eight points behind United with the title now looking very slim.
Arsenal were pressing and pressing all day and finally got the goal they so rightly deserved when Arteta nipped in to take the ball off David Pizarro in midfield before advancing towards the area and firing a brilliant shot to beat Joe Hart at his near post.
Arsene Wenger's men were well on top of things during the first and if it wasn't for the defensive efforts of Vincent Kompany, City may have found themselves behind at the break but nonetheless, Roberto Mancini's charges still found themselves in it late.
Arsenal were desperately unlucky not to open the scoring in the 16th minute when Robin van Persie headed Arteta's corner goalward but Thomas Vermaelen managed to get himself in the way with the ball deflecting off the Belgian and onto the crossbar with Tomas Rosicky nodding the rebound over.
Balotelli was close to scoring against the run of play ten minutes later with City's best chance of the first half when he knocked James Milner's cross on target with the outside of his left boot but Kieran Gibbs was perfectly placed in front of the goal line to clear.
Eight minutes into the second half, Wojciech Szczesny had to tip Sergio Aguero's back post heard over the crossbar before van Persie was extremely unlucky when his header from Alex Song's deft chip hit the base of the upright with Hart rooted to the spot.
van Persie had the ball in the back of the net with 20 minutes remaining but the goal did not count as the Gunners skipper had been called offside, six minutes before the home team should have gone ahead when Theo Walcott's side-footed attempt bounced back off the post with Vermaelen only needing to slot it home to a vacant goal but scuffed his effort before Yossi Benayoun could not bundle it over under duress from Hart and Kompany.
A few minutes after the goal, City's day went from bad to worse when Balotelli was given his marching orders with a second bookable offence for a late lunge on Bacary Sagna to make it his fourth red card since joining the club. The sending off signified a touch of justice as the Italian escaped unpunished for a horrible first-half challenge on Song.
And finally, Aaron Ramsey could have capped off a great day for Arsenal but fired wide after doing all the hard work of getting around advancing defenders but the job had been done minutes earlier as the North Londoners made life very difficult for a flailing City outfit who had their least amount of shots on goal in the Premier League this season.
TRIBAL ASKS: Is that it? Is the title heading back to Old Trafford?
Emirates Stadium, London - 60,096
Red card:MANC - Mario Balotelli 90'