Two goals for Emmanuel Adebayor and one for Eduardo de Silva made Arsenal the first team to win at City in the league this season and put them on 60 points. United, who could have returned to the summit with three points in a later kickoff at White Hart Lane, trailed to Dimitar Berbatov"s first half effort but levelled three minutes into stoppage time with a Michael Dawson own goal. United are two points behind, while third-placed Chelsea are six adrift after drawing 1-1 at Portsmouth for whom deadline day signing Jermain Defoe scored on his debut.
Everton stayed fourth after a 0-0 draw at Blackburn Rovers while at the bottom end of the table there were important victories for Wigan Athletic against West Ham United and Bolton Wanderers over Reading. Bottom club Derby County drew 1-1 away with Birmingham City.
Togo striker Emmanuel Adebayor took his league tally to 18 with two goals in a masterful performance in which he also set up strike partner Eduardo da Silva. Gelson Fernandes scored for City who were generally second best.
Adebayor put the Gunners ahead after nine minutes, sweeping a shot through Joe Hart after a surging run from Bacary Sagna. He turned provider after 26 minutes, heading down Gael Clichy"s cross to Eduardo who chested down and volleyed beyond Hart.
City were handed an unexpected lifeline minutes later when Vedran Corluka robbed Clichy and set up Fernades for a neat finish past keeper Jens Lehmann who started in place of the injured Manuel Almunia.
Arsenal did not sit on their lead in the second half but had to wait until two minutes from time to make the points certain after Cesc Fabregas"s ball reached him on the edge of the area.
City"s only other defeat at home this season came against Tottenham in the League Cup.
“At the moment I am enjoying myself like a little kid," Adebayor, who has scored eight goals in his last six games, told an English portal. “At 2-0 we thought we had already won it but they scored and that made it a bit difficult."
French midfielder Ousmane Dabo said his return to Serie A club Lazio after an 18-month spell at Manchester City was the end of a nightmare.
“I wanted to have a new experience, but lots of ugly things happened to me instead - bans, injuries, (I was) devastated by a brawl and then I didn"t play any more,"
Dabo"s former team mate Joey Barton has been charged with attacking him during a training ground incident last May. Barton, now with Newcastle United, has denied the alleged attack.