Ten-man Everton denied Manchester City the chance to top the league table at Christmas for the first time since 1929 as they held on to win at Eastlands.
Tim Cahill headed home the opener after four minutes before setting up Leighton Baines to curl in Everton's second.
Everton lost Victor Anichebe to a second booking on the hour and City pulled a goal back when Yaya Toure's shot deflected in off Phil Jagielka.
City were also reduced to 10 men when Kolo Toure was sent off in injury time.
Everton arrived in Manchester without a win in the league in seven games, but with a fine record of three consecutive league victories at the City of Manchester Stadium.
In contrast, City had not lost in seven league matches and were looking to overtake league leaders Manchester United, who have played two games fewer owing to the postponement of ties with Blackpool and Chelsea in December.
That fine run of form belied the internal upheaval that had surrounded the club since captain Carlos Tevez controversially slapped a transfer request on to manager Roberto Mancini's desk.
The striker missed City's midweek 1-1 Europa League draw with Juventus and it looked as though the want-away controversy would rumble on into tonight's tie with Everton.
But so-called "clear the air" talks on Monday afternoon saw 26-year-old Tevez formally withdraw his request and Mancini rewarded the Argentine with a place in the starting line-up and the captain's armband.
As kick-off approached, it looked for all the world as if the skipper's turnaround would give the Blues the platform from which to launch their bid to overtake bitter rivals Manchester United at the top of the table.
After all, having yet to lose a league game in which he had scored, Tevez had become an inspirational lucky charm for Mancini's side.
But when it comes to Eastlands, Everton boss David Moyes had his own lucky charm in the form of leading scorer Cahill.
The Australian had scored two goals at City's ground in the past two seasons and he extended that record with just four minutes gone.
Sole striker Anichebe played his part, flicking Baines' pass into the path of Seamus Coleman before Cahill promptly headed the Irishman's incisive cross beyond Joe Hart.
It was the 31-year-old Cahill's third goal in as many seasons at Eastlands and it was a dream start for the visitors, whose poor run of form had seen them skirt around the relegation zone for much of the season.
Eager to put some distance between themselves and the bottom of the table, Everton pressed for a second and while defender Pablo Zabaleta was off the pitch with a head injury, Anichebe and Cahill combined again to create a second goal on 19 minutes.
Anichebe, in only his third league game this season, set off on a storming run down the left, crossing to Cahill who laid the ball neatly off to defender Baines who curled a shot beyond Hart.
A stitched-up Zabaleta returned to the pitch minutes later and the Argentine quickly attempted to right the tie, crossing unmarked into the box to his fellow countryman Tevez, whose shot went behind for a corner.
City upped the pressure and absolutely peppered the Everton goal with shots for a short spell after the half hour, but the Toffees somehow kept out David Silva, Vincent Kompany and Mario Balotelli.
Temperatures were dipping in the ground but City were anxious to put the heat on Everton's defence and Aleksander Kolorav almost beat Tim Howard but the Serbian's free-kick was narrowly deflected wide.
Zabaleta, despite the heavy strapping to his head, was proving to be City's best player as the half-time whistle approached, that plaudit definitely not falling to club captain Tevez, who was off the pace.
Mancini added Adam Johnson into the mix after the break, bringing off James Milner, and the England player offered greater width on the right.
90:00+4:59 The referee signals the end of the game.
Full Time
90:00+3:43 Foul by Kolo Toure (Man City) on Diniyar Bilyaletdinov (Everton). Free kick taken left-footed by Sylvain Distin (Everton)
from own half, resulting in open play.
90:00+3:43 Sent off Kolo Toure (Man City) dismissed for second bookable offence.
90:00+2:55 Foul by Kolo Toure (Man City) on Phil Neville (Everton). Free kick taken right-footed by Phil Neville (Everton) from own half,
resulting in open play.
90:00+2:55 Booking Kolo Toure (Man City) booked for unsporting behaviour.
90:00+1:57 Inswinging corner from right by-line taken left-footed by Adam Johnson (Man City) to near post, clearance by Sylvain Distin
(Everton).
90:00+1:44 Shot by Carlos Tevez (Man City) right-footed from left channel (20 yards), save (tipped round post) by Tim Howard (Everton).
90:00+1:07 Defending throw-in by Gareth Barry (Man City).
90:00+1:04 Attacking throw-in by Phil Neville (Everton).
90:00+1:01 Attacking throw-in by Phil Neville (Everton).
90:00+0:44 Booking Gareth Barry (Man City) booked for dissent.
89:58 Attacking throw-in by Phil Neville (Everton).
88:57 Joao Alves Jo (Man City) caught offside. Free kick taken right-footed by Tim Howard (Everton) from own half, resulting in
open play.
88:19 Shot by David Silva (Man City) left-footed from left side of penalty area (20 yards), save (caught) by Tim Howard (Everton).
88:02 Corner from left by-line taken short left-footed by Aleksandar Kolarov (Man City).
87:00 Shot by Gnegneri Toure Yaya (Man City) right-footed from right channel (25 yards), save (parried) by Tim Howard (Everton).
86:10 Goal kick taken long by Tim Howard (Everton).
85:59 Shot by Adam Johnson (Man City) left-footed from right wing (25 yards), over the bar.
84:34 Goal kick taken long by Tim Howard (Everton).
84:10 Shot by Gareth Barry (Man City) right-footed from left channel (25 yards), blocked by Phil Neville (Everton).
83:47 Foul by Marouane Fellaini (Everton) on Pablo Zabaleta (Man City). Free kick taken right-footed by Carlos Tevez (Man City)
from right wing, passed.
83:16 Defending throw-in by Pablo Zabaleta (Man City).
82:31 Substitution Man City substitution: Mario Balotelli replaced by Joao Alves Jo (injury).
82:27 Attacking throw-in by Phil Neville (Everton).
81:06 Attacking throw-in by Carlos Tevez (Man City).
79:20 Defending throw-in by Phil Neville (Everton).
78:46 Substitution Everton substitution: Phil Jagielka replaced by Tony Hibbert (tactical).
77:57 Inswinging corner from right by-line taken left-footed by Adam Johnson (Man City) to far post, save (caught) by Tim Howard
(Everton).
77:24 Shot by Carlos Tevez (Man City) right-footed from right side of six-yard box (12 yards), save (tipped round post) by Tim Howard
(Everton).
77:06 Shot by Mario Balotelli (Man City) right-footed from left side of penalty area (12 yards),
76:39 Attacking throw-in by Phil Neville (Everton).
76:08 Goal kick taken long by Tim Howard (Everton).
75:58 Shot by Adam Johnson (Man City) left-footed from right channel (25 yards), over the bar.
75:37 Outswinging corner from left by-line taken left-footed by Aleksandar Kolarov (Man City) to near post, resulting in open play.
75:05 Substitution Everton substitution: Seamus Coleman replaced by Louis Saha (tactical).
74:09 Substitution Everton substitution: Leon Osman replaced by Diniyar Bilyaletdinov (tactical).
73:35 Inswinging corner from right by-line taken left-footed by Adam Johnson (Man City) to near post, resulting in open play.
71:35 Gnegneri Toure Yaya takes a shot. Phil Jagielka gets a block in. Assist by Gnegneri Toure Yaya.
71:35 GOAL - Gnegneri Toure Yaya:Man City 1 - 2 Everton Goal by Gnegneri Toure Yaya (Man City) right-footed (bottom-left of goal) from right side of penalty area (12 yards).Man City
1-2 Everton.
70:37 Goal kick taken long by Tim Howard (Everton).
69:48 Attacking throw-in by Aleksandar Kolarov (Man City).
69:27 Goal kick taken long by Tim Howard (Everton).
69:15 Shot by Gareth Barry (Man City) left-footed from right side of penalty area (18 yards), over the bar.
69:04 Shot by David Silva (Man City) left-footed from right channel (20 yards), blocked by Phil Jagielka (Everton).
68:56 Defending throw-in by Phil Neville (Everton).
67:30 Defending throw-in by Pablo Zabaleta (Man City).
67:17 Foul by Tim Cahill (Everton) on Carlos Tevez (Man City). Free kick taken right-footed by Carlos Tevez (Man City) from own
half, passed.
65:58 Shot by David Silva (Man City) left-footed from left side of penalty area (12 yards), blocked by Phil Neville (Everton).
Correction - 65:24 Tim Cahill is flagged offside by the assistant referee. Joe Hart takes the free kick.
65:24 Tim Cahill (Everton) caught offside. Free kick taken right-footed by Joe Hart (Man City) from own half, passed.
64:39 Tim Cahill (Everton) caught offside. Free kick taken right-footed by Kolo Toure (Man City) from own half, passed.
63:55 Attacking throw-in by Leighton Baines (Everton).
62:54 Foul by Pablo Zabaleta (Man City) on Leon Osman (Everton). Free kick taken right-footed by Tim Howard (Everton) from own half,
resulting in open play.
62:32 Attacking throw-in by Aleksandar Kolarov (Man City).
61:56 Foul by Tim Cahill (Everton) on Kolo Toure (Man City). Free kick taken right-footed by Kolo Toure (Man City) from own half,
passed.
61:29 Goal kick taken long by Tim Howard (Everton).
59:33 Foul by Victor Anichebe (Everton) on Pablo Zabaleta (Man City). Free kick taken right-footed by Gnegneri Toure Yaya (Man City)
from right channel, passed.
59:33 Sent off Victor Anichebe (Everton) dismissed for second bookable offence.
59:05 Attacking throw-in by Pablo Zabaleta (Man City).
58:02 Foul by Leon Osman (Everton) on Pablo Zabaleta (Man City). Free kick taken left-footed by Aleksandar Kolarov (Man City) from
right wing, resulting in open play.
57:15 Shot by Gnegneri Toure Yaya (Man City) right-footed from right channel (25 yards), blocked by Jack Rodwell (Everton).
55:43 Defending throw-in by Phil Neville (Everton).
54:58 Foul by Victor Anichebe (Everton) on Joe Hart (Man City). Free kick taken right-footed by Joe Hart (Man City) from own half,
resulting in open play.
54:58 Booking Victor Anichebe (Everton) booked for unsporting behaviour.
52:28 Foul by Victor Anichebe (Everton) on Aleksandar Kolarov (Man City). Free kick taken left-footed by Aleksandar Kolarov (Man
City) from own half, passed.
52:20 Attacking throw-in by Phil Neville (Everton).
50:51 Goal kick taken long by Tim Howard (Everton).
50:28 Shot by Aleksandar Kolarov (Man City) left-footed from right channel (25 yards), missed right.
49:50 Defending throw-in by Adam Johnson (Man City).
48:41 Attacking throw-in by Leighton Baines (Everton).
47:28 Cross by Adam Johnson (Man City), save (caught) by Tim Howard (Everton).
46:56 Shot by Aleksandar Kolarov (Man City) left-footed from left channel (25 yards), save (parried) by Tim Howard (Everton).
45:46 Defending throw-in by Aleksandar Kolarov (Man City).
45:01 The second half begins.
45:01 Substitution Man City substitution: James Milner replaced by Adam Johnson (tactical).
45:00+2:21 The ref blows to end the first period.
Half Time
45:00+1:46 Attacking throw-in by Pablo Zabaleta (Man City).
45:00+1:05 Attacking throw-in by Pablo Zabaleta (Man City).
44:39 Attacking throw-in by Aleksandar Kolarov (Man City).
42:20 Foul by Gnegneri Toure Yaya (Man City) on Marouane Fellaini (Everton). Free kick taken right-footed by Sylvain Distin (Everton)
from own half, resulting in open play.
41:38 Defending throw-in by Leighton Baines (Everton).
41:07 Attacking throw-in by Pablo Zabaleta (Man City).
40:28 Foul by Phil Neville (Everton) on Mario Balotelli (Man City). Free kick taken left-footed by Gareth Barry (Man City) from
left wing, passed.
40:13 Defending throw-in by Pablo Zabaleta (Man City).
39:56 Attacking throw-in by Leighton Baines (Everton).
39:26 Attacking throw-in by Phil Neville (Everton).
38:51 Defending throw-in by Aleksandar Kolarov (Man City).
38:21 Handball by James Milner (Man City). Free kick taken left-footed by Leighton Baines (Everton) from left wing, resulting in
open play.
37:59 Foul by Mario Balotelli (Man City) on Phil Jagielka (Everton). Free kick taken left-footed by Sylvain Distin (Everton) from
own half, resulting in open play.
37:55 Goal kick taken long by Tim Howard (Everton).
37:44 Shot by Gnegneri Toure Yaya (Man City) right-footed from right channel (20 yards), missed right.
37:15 Shot by David Silva (Man City) left-footed from right channel (25 yards), blocked by Phil Jagielka (Everton).
36:38 Inswinging corner from right by-line taken left-footed by Aleksandar Kolarov (Man City) to centre, save (caught) by Tim Howard
(Everton).
35:27 Foul by Tim Cahill (Everton) on Gareth Barry (Man City). Free kick taken left-footed by Aleksandar Kolarov (Man City) from
right channel (30 yards), save (tipped round post) by Tim Howard (Everton).
35:22 Attacking throw-in by James Milner (Man City).
34:44 Outswinging corner from right by-line taken right-footed by Mario Balotelli (Man City) to near post, resulting in ball out
of play.
33:47 Foul by Marouane Fellaini (Everton) on Carlos Tevez (Man City). Free kick taken right-footed by James Milner (Man City) from
right channel, passed.
33:47 Booking Marouane Fellaini (Everton) booked for unsporting behaviour.
33:04 Shot by Pablo Zabaleta (Man City) right-footed from centre of penalty area (12 yards), blocked by Phil Neville (Everton).
32:46 Shot by David Silva (Man City) left-footed from right channel (20 yards), blocked by Sylvain Distin (Everton).
32:28 Shot by David Silva (Man City) left-footed from left channel (20 yards), blocked by Leighton Baines (Everton).
30:55 Inswinging corner from right by-line taken left-footed by Aleksandar Kolarov (Man City) to near post, shot by Vincent Kompany
(Man City) volleyed left-footed from left side of penalty area (12 yards), blocked by Phil Jagielka (Everton).
29:33 Defending throw-in by Aleksandar Kolarov (Man City).
29:17 Defending throw-in by Aleksandar Kolarov (Man City).
28:33 Shot by Leon Osman (Everton) left-footed from left channel (25 yards), blocked by Kolo Toure (Man City).
27:50 Foul by Victor Anichebe (Everton) on James Milner (Man City). Free kick taken left-footed by Kolo Toure (Man City) from own
half, passed.
27:24 Goal kick taken long by Tim Howard (Everton).
27:06 Outswinging corner from left by-line taken left-footed by Aleksandar Kolarov (Man City) to near post, shot by Mario Balotelli
(Man City) left-footed from left side of penalty area (12 yards), over the bar.
Correction - 26:36 Inswinging corner taken from the right by-line by Aleksandar Kolarov, Jack Rodwell makes a clearance.
26:36 Inswinging corner from right by-line taken left-footed by Aleksandar Kolarov (Man City) to far post, clearance by Jack Rodwell
(Everton).
25:01 Foul by Tim Cahill (Everton) on Gareth Barry (Man City). Free kick taken left-footed by Gareth Barry (Man City) from own half,
passed.
24:27 Foul by Carlos Tevez (Man City) on Phil Jagielka (Everton). Free kick taken right-footed by Phil Neville (Everton) from own
half, resulting in open play.
22:17 Foul by Vincent Kompany (Man City) on Jack Rodwell (Everton). Free kick taken right-footed by Phil Neville (Everton) from
right channel, resulting in open play.
22:17 Booking Vincent Kompany (Man City) booked for unsporting behaviour.
21:10 Attacking throw-in by Aleksandar Kolarov (Man City).
20:40 Defending throw-in by James Milner (Man City).
19:57 Foul by Vincent Kompany (Man City) on Tim Cahill (Everton). Free kick taken right-footed by Phil Jagielka (Everton) from own
half, passed.
18:15 Assist (pass) by Tim Cahill (Everton) from right side of penalty area.
18:15 GOAL - Leighton Baines:Man City 0 - 2 Everton Goal by Leighton Baines (Everton) right-footed (bottom-right of goal) from left side of penalty area (18 yards).Man City 0-2
Everton.
17:12 Attacking throw-in by James Milner (Man City).
15:09 Mario Balotelli (Man City) caught offside. Free kick taken right-footed by Tim Howard (Everton) from own half, resulting in
open play.
13:39 Outswinging corner from left by-line taken left-footed by Aleksandar Kolarov (Man City) to near post, header by Mario Balotelli
(Man City) from left side of penalty area (12 yards), save (caught) by Tim Howard (Everton).
12:45 Defending throw-in by Leighton Baines (Everton).
12:23 Defending throw-in by Leighton Baines (Everton).
11:16 Defending throw-in by Pablo Zabaleta (Man City).
10:46 Goal kick taken long by Tim Howard (Everton).
10:35 Shot by David Silva (Man City) left-footed from left side of penalty area (12 yards), missed left.
8:31 Attacking throw-in by Pablo Zabaleta (Man City).
7:30 Attacking throw-in by Phil Neville (Everton).
6:30 Defending throw-in by Pablo Zabaleta (Man City).
6:10 Defending throw-in by Leighton Baines (Everton).
5:39 Foul by Tim Cahill (Everton) on James Milner (Man City). Free kick taken right-footed by James Milner (Man City) from own
half, passed.
3:47 Header by Victor Anichebe (Everton) from left side of six-yard box (6 yards), resulting in open play. Assist (cross) by Seamus
Coleman (Everton) from right by-line.
3:47 GOAL - Tim Cahill:Man City 0 - 1 Everton Headed goal by Tim Cahill (Everton) (bottom-right of goal) from right side of six-yard box (6 yards).Man City 0-1 Everton.
2:14 Goal kick taken long by Joe Hart (Man City).
0:00 The referee gets the game underway.
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