Arsenal had to come from behind after Sergio Aguero scored his 30th goal of the season for City in the 63rd minute, racing away on to a pass from Yaya Toure.
Holders Arsenal's long unbeaten run in the FA Cup continued but they were frustrated by stubborn Championship leaders Hull City on Saturday, drawing 0-0 in a dreary fifth-round tie at the Emirates Stadium.
Dutch striker Robin van Persie will return for Arsenal in the first leg of their League Cup semi-final against Tottenham Hotspur.
Jens Lehmann may be allowed to leave Arsenal next month if the right offer is received, manager Arsene Wenger said.
Watford climbed into the top four of the Premier League after Tom Cleverley's 92nd-minute goal gave them a 2-1 victory over Arsenal at Vicarage Road on Saturday.
Arsenal go into their 10th successive Champions League campaign with burning optimism fuelled by their early season form and manager Arsene Wenger's newly signed long-term commitment to the club.
Arsenal may be down but manager Arsene Wenger said they are very definitely not yet out of the hunt for major honours this season, which they can prove when they face Liverpool for the third time in a week on Tuesday. Wenger takes his weary men to Anfield for the second leg of their Champions League quarter-final after two 1-1 draws with Liverpool at the Emirates Stadium in the last few days.
Smiling and waving to fans, the 76-year-old Ferguson took his seat in the directors' box for the first time since his operation in May.
Meanwhile, Manchester United winger Jesse Lingard says his "heart is at Old Trafford" and negotiations are ongoing over a new deal with the club that will extend a contract that runs out at the end of next season.
Spanish midfielder Santi Cazorla would be happy to sign a new contract with Arsenal despite local media linking him with a move to La Liga side Atletico Madrid.
Arsenal forward Alexis Sanchez can show Liverpool why he would have made the perfect replacement for Luis Suarez when the Chilean travels to Anfield in the Premier League on Sunday.
Atletico Madrid striker Diego Costa haunted Arsenal again by firing his side to a 1-0 win in Thursday's Europa League semi-final second leg to send the Spaniards into the final and deny Arsene Wenger a dream end to his long reign as Arsenal coach.
IMAGES from an exciting Europa League semi-final first leg match played at Emirates Stadium on Thursday
Arsene Wenger and Alex Ferguson are backing Italian Fabio Capello to take over the vacant job of England manager.
Arsene Wenger remains confident his side can complete the double over Sevilla and finish top of Champions League Group.
Manchester City withdrew from the battle to secure the services of Arsenal's Chilean forward Alexis Sanchez, leaving Jose Mourinho's Manchester United as the most likely destination for the 29-year-old.
Guardiola beat out Chelsea's Antonio Conte, Burnley's Sean Dyche, Liverpool's Juergen Klopp, Manchester United's Jose Mourinho and Arsenal's Arsene Wenger for the award.
Arsenal's improbable late run at the Premier League title gained momentum with a 1-0 victory at struggling Burnley on Saturday, an eighth straight triumph that moved them within four points of leaders Chelsea.
Images from Sunday's English Premier League matches.
Claudio Ranieri was named the League Managers' Association (LMA) manager of the year on Monday after leading 5,000-1 outsiders LeicesterCity to an improbable Premier League title.
Arsenal face an uncertain future after David Dein suddenly quit as vice-chairman on Wednesday after 24 years with the club, media reports said.
Arsenal snatched a dramatic 2-1 victory over Burnley to keep their title hopes on track after the referee Jon Moss awarded penalties to both sides and sent off home manager Arsene Wenger in injury time.
Following is a match by match look at the English Premier League's season-opening weekend fixtures:
Out-battled for an hour by their modest south coast opponents, Arsenal belatedly sparked into life and Olivier Giroud's glancing header two minutes into stoppage time completed their remarkable recovery from 3-0 down.
Arsenal re-established themselves as serious contenders for their first Premier League title since 2004 with a comfortable victory at lowly Bournemouth on Sunday.
'Thierry will not be involved as it would not be fair to play the big players in the final,' manager Arsene Wenger said.
News of all that's transpired on and off the football field
Arsenal will reportedly play Chelsea in a fourth-round Capital One Cup match after winning 4-3 on penalties against West Bromwich Albion on Wednesday at The Hawthorns.
Manchester City manager Manuel Pellegrini believes Chelsea boss Jose Mourinho is trying to ease the pressure on himself with his regular jibes at Premier League counterparts.
UEFA president Michel Platini has repeated his call for the "triple punishment" of red card, penalty and suspension to be dropped following two controversial dismissals in the Champions League this week.
Cesc Fabregas and Sol Campbell are doubtful for Champions League semi-final first leg against Villarreal
Manchester United striker Ruud van Nistelrooy has admitted that the club's loss of form is down in part to David Beckham's transfer to Real Madrid.
The 37-year-old Mikel Arteta played for Arsenal from 2011 to 2016 before moving to Manchester City as assistant manager, where he won the Premier League twice.
Arsenal plan to sign Theo Walcott, the Southampton teenager rated as the finest English prospect since Wayne Rooney.
David Beckham is still hurting from his bitter Manchester United exit sparked by the collapse of his relationship with Alex Ferguson.
Arsenal's resurgent Alexis Sanchez scored twice to help ease their top-four jitters in a 2-0 victory over West Bromwich Albion in the Premier League at a less than full Emirates Stadium on Thursday.
News of all that's transpired on and off the football field
The Arsenal centre back stormed out of Highbury stadium after being substituted at halftime.
Arsenal scored twice in three minutes through a deflected Granit Xhaka strike and Danny Welbeck's header to claim a deserved 2-0 win over Manchester United on Sunday and inflict a first Premier League defeat on the visitors in 26 games.
>The World Cup captain was a remarkable species: Always trying, pushing, lifting, harassing, delivering; the kind who would unhesitatingly jump into the deep end to save the day. They're all gone now, says Dhruv Munjal.
