The Reds moved to within a point of the Blues as Marcus Rashford wrote himself into United folklore with a superbly taken winner at the Etihad.
The local lad- on his Manchester derby debut- produced the match winning moment early in the first half when he nutmegged Martin Demichelis and did the rest with a composed finish past Joe Hart on 16 minutes.
The reverse fixture at Old Trafford in October was a largely cagey and sterile affair, but this contest started at lightning pace and the hosts went close twice early on.
Jesus Navas volleyed narrowly wide before the Spaniard was denied by the sprawling David de Gea after neat link up between compatriot David Silva and Raheem Sterling.
City were made to pay for their early profligacy when, with a little over a quarter of an hour played, Rashford hit home what proved to be the winner.
Juan Mata found space in midfield and picked out the 18 year old whom left Demichelis for dead and curled home his fifth goal in eight United games to put the visitors ahead.
Hart saved well to keep out the impressive Anthony Martial, but City remained a threat at the other end and should have equalised when Demichelis nodded wide from a Silva set-piece.
Sterling was then forced off through injury and United had a strong penalty appeal waved away when Rashford went down in first half stoppage time.
City's day then went from bad to worse when Hart was injured clearing an underhit back pass, but stand in stopper Willy Caballero soon saved well from Martial's deflected strike to prevent a second United goal.
That chance sparked Manuel Pellegrini's side into life and the hosts went close twice in quick succession on the hour mark.
Substitute Wilfried Bony's goalbound flick was kept out by the superb Chris Smalling and United scourge Sergio Aguero headed off a post from Yaya Toure's teasing delivery.
City were now on top but, for all their pressing, De Gea was a relative bystander as United expertly soaked up the pressure and looked to hit their hosts on the counter.
As the match entered six minutes of added time, United's battling display was almost undone in the cruellest fashion by a man whom has so often hurt us.
Aguero took down and turned on Silva's diagonal pass but could only pull wide from eight yards in a chance that summed up his side's afternoon.
Instead, the points and derby-day bragging rights belong to Louis van Gaal's United on a memorable day for Rashford and the Reds.
Overall team performance: 8.5/10
United Faithful Man of the Match: An immense all round team performance but Chris Smalling was the pick of the bunch. Stood up hugely against Aguero when on an early booking.