The 18-year-old, who is tipped for a golden future with club and country, ran the show as City eventually overpowered the League One strugglers to ease to victory.
City manager Pep Guardiola made 10 changes from the side that won 5-0 at Cardiff City at the weekend and kept £256m worth of talent on the bench - but still had enough to win without ever being threatened.
Gabriel Jesus' close-range header gave them the lead at half-time and City gave the scoreline a more realistic look as Oxford, second from bottom in League One, understandably tired late on.
Foden, who had helped create Jesus' opener, produced a superb pass to put Riyad Mahrez clear for his third goal in two games, then got the reward his performance deserved with a perfect low drive with virtually the last kick of the game.
“It's hard to put into words - it hasn't fully sunk in," said Foden.
“I've dreamed of this moment, growing up as a City supporter.
“My first goal is special to me and I'm happy to have helped the team to get the win.
“Mostly, when I was dreaming (about scoring for City), it was in the Premier League but in any competition, it's special to get your first goal.
“I'm happy to get it. I couldn't contain myself - I ran off, mad!
“It's a moment I'll never forget."