Aguero and Sane were in front of goal for City
Liverpool can't now win the Premier League unbeaten. Manchester City has renewed hope it won't be surrendering the trophy at all.
A title defense faltering a week ago is back on track for Pep Guardiola after City beat Liverpool 2-1 on Thursday, inflicting the leader's first league loss of the season in their 21st game.
Completing the packed festive program with an engrossing encounter, Liverpool's threatened a comeback when Roberto Firmino canceled out Sergio Aguero's first-half opener but Leroy Sane struck the winner in the 72nd minute.
A year after Liverpool ended City's hopes of emulating Arsenal's 2003-04 Invincibles, the tables were turned on a freezing night that saw the title race open up again.
"Pretty intense," Liverpool manager Juergen Klopp said. "It had wild moments."
Back-to-back losses for City less than two weeks ago had put Liverpool on a seemingly smoother path to a first English title in 29 years. Rather than going 10 points clear, Liverpool's lead has been trimmed to four points by City, which reclaimed second place from Tottenham.
"It's still in Liverpool's hands, but our performance was beyond anything else I've ever witnessed," City captain Vincent Kompany said.
"We went toe-to-toe with a very physical and aggressive team and we matched them for everything, if not more."
City was spared from going behind by just 11 millimeters (0.4 inches) of the ball failing to cross the line in the 18th minute.
When Sadio Mane hit the post, City defender John Stones' attempted clearance went straight onto goalkeeper Ederson's head. The ball looped back toward goal and Stones had to scramble to clear. It proved just enough, as goal-line technology ruled out the score.
With video review not entering the Premier League until next season, the eyes of referee Anthony Taylor saved City captain Vincent Kompany around the half-hour mark. A sliding tackle into Mohamed Salah that Liverpool manager Klopp later said should been a sending off only saw Kompany booked.
"I thought it was a great challenge — was it not?" Kompany said, chuckling. "I felt I got the ball, a little bit of the man but it wasn't naughty. I didn't try to injure him, that's for sure. It was that or let him go through on goal."
The hosts did go through on goal themselves — and scored in the 40th minute.
Receiving Bernardo Silva's cross on his right foot, Aguero got away from Dejan Lovren and used his left boot to power the ball into the roof of the net.
"We need Sergio in this kind of game. The finish was incredible," Guardiola said. "It was important we played with courage in our game and we were aggressive in our pressing."
So too was Liverpool in the second half, showing just why the Premier League era's perennial underachiever might yet win the English title for a 19th time.
The equalizer was created by the fullbacks in the 64th. Trent Alexander-Arnold sent a diagonal pass to the far post where Andy Robertson volleyed the ball across the penalty area for an unmarked Firmino to head into an empty net.
Just when Liverpool was gaining momentum, City roared back in front from a blistering counterattack. Raheem Sterling cut in from the left and slipped the ball through to Sane, who fired a shot past Alexander-Arnold and in off the post.
"It was a very intense game for both teams and we were unlucky with our finishing," Klopp said. "We could've drawn, we could've won it. We lost, but it's not the biggest problem."
Not when Klopp reflected on the four-point lead over City having now twice played the team that has won the title three times since 2012.
"I would have paid money for it you cannot believe," Klopp said.
