Liverpool flooded midfield and whilst City were allowed to spray the passes around they were unable to find a cutting edge in the final third. After the break City tired as the half wore on and it was the Reds who looked the more likely to score with Joe Hart keeping the visitorâ€™s unbeaten record in the Premiership intact.
City took the lead just after the half-hour from skipper Vincent Kompany who headed home David Silvaâ€™s corner.
Roberto Mancini probably hoped the league leaders would kick-on from that goal but instead found themselves pegged back within a couple of minutes.
Liverpool took their unbeaten league run to eight games and almost followed up their fine win at Chelsea last week with the notable scalp of City as they gradually increased the pressure on the table toppers.
Balotelli had already been booked during his 18 minute cameo when the Italian clumsily challenged Martin Skrtel with his elbow and was shown a second yellow leaving City eight minutes to survive with ten men.
In fact David Villa almost won it for City but he fluffed his lines with only Jose Reina to beat, but the Manchester side maintain their five point lead over rivals United at the top of the Premiership.
Liverpool's Wales forward Craig Bellamy was left out following the death of Gary Speed.
Referee: Martin Atkinson
Liverpool scorers: Lescott og 33
Man City scorers: Kompany 31
TRIBAL ASKS: Did this game show just how much Liverpool have improved this season?
Yellow cards: Kompany (MANC), Barry (MANC), Balotelli (MANC), Carroll (LIV), Milner (MANC)
Red card: Balotelli