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Just four days after crashing out of the Champions League against Real Madrid, it was another chastening day for Pep Guardiola and his side.
City, without the injured Erling Haaland, enjoyed the early possession but went behind to Mo Salah's deflected strike 14 minutes in.
And after Omar Marmoush had a goal ruled out for offside, Dominik Szoboszlai swept home a second eight minutes before the break and the hosts couldn't break down the Reds in the second half.
City remain fourth, but are now level on points with Newcastle below them.
And today's showing has further highlighted their brutal fall from grace.
Express Sport brings you the Man City player ratings...
Man City player ratings vs Liverpool
Ederson - 5
The opening goal deflected off Nathan Ake and left him helpless, but the Brazilian was all too easily wrong-footed for the second.
Failed to show off his range of passing and a summer exit still seems on the cards.
Rico Lewis - 4
Cheaply gave the ball away outside his own area before Liverpool forced the corner that led to Salah's goal.
Looked assured on the ball and one brilliant cover tackle denied Salah.
Nathan Ake - 5
Diverted Salah's opener past his own keeper and failed to command his back four.
Dribbled past Trent Alexander-Arnold eight times alone in the first half and looked to run at the Liverpool defence all afternoon.
Nowhere near the levels of last season.
Subs:
James McAtee (for De Bruyne, 66) - 6
The youngster struggled for impact after coming on.
Ruben Dias (for Ake, 77) - 6
Rarely tested in the last 13 minutes with Liverpool content to sit deep.
Mateo Kovacic (for Gonzalez, 78) - 7
At least tried to get on the ball and play some passes in the final third.
Ilkay Gundogan (for Marmoush, 77) - 6
Some neat touches in his cameo but nothing hurt to the opposition.
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