Tottenham slipped five points behind Manchester City after losing to Pep Guardiola's side for the third time in a row.
Playing on a bobbly Wembley pitch that had been ravaged by three NFL games, Spurs suffered a nightmare start and fell behind in the sixth minute as poor defending from Kieran Trippier allowed Raheem Sterling to tee up Riyad Mahrez.
The North Londoners rallied and gave their visitors a few big scares but they were unable to get back on level terms and suffered their first defeat in five Premier League matches.
Spurs fans would have feared the worst when City took the lead so early, given the reigning champions triumphed 7-2 on aggregate across last season's two meetings. But Tottenham refused to capitulate this time and stayed in the contest right until the end.
While Liverpool outclassed Mauricio Pochettino's side at Wembley earlier this season and should certainly have won by more than one goal, the Argentine and his players will feel they could have got something against City and that the gap was not that big.
For the second time this month, Spurs started a big match poorly. They fell behind inside the opening two minutes of their Champions League duel against Barcelona at Wembley, and it was a similar story here.
Big chances then went begging. Moussa Sissoko, Harry Kane and Erik Lamela should all have done better in front of goal. There is a real sense of a missed opportunity after this defeat.
Manager rating out of 10
7 -- Pochettino's decision to name Moussa Sissoko in his lineup and leave Christian Eriksen on the bench raised eyebrows, but the Frenchman justified his inclusion and Spurs caused City problems with their 4-3-3 formation. Pochettino has often been guilty of adopting gung-ho and slightly naive tactics against the top teams, but the balance was good this time.
Player ratings (1-10; 10 = best. Players introduced after 70 minutes get no rating).
GK Hugo Lloris, 7 -- Helpless for the goal and made some smart saves, notably from Mahrez at his near post. His kicking remains a weakness though.
DF Kieran Trippier, 4 -- Made three errors against Sterling when he gifted City their early opener, which proved decisive. While he recovered well enough, the damage had been done.
DF Toby Alderweireld, 6 -- The Belgian was careful not to commit himself too easily or go to ground unless it was essential. City had chances and Spurs looked vulnerable on occasions, but this was a more resilient display than last season's defeats against City.
DF Davinson Sanchez, 6 -- The Colombian was strong in the air, and City got very little joy when they played high balls into the box. He used his pace to good effect too.
DF Ben Davies, 5 -- Made some good tackles and blocks but this was another hesitant, unconfident display in possession and Danny Rose's return cannot come soon enough.
MF Moussa Sissoko, 7 -- Did his job well, winning plenty of challenges while offering a threat going forward. He just needed to do better when he got in behind Benjamin Mendy in the first half. Instead of pulling the trigger, he dallied and his attempted pass was blocked.
MF Mousa Dembele, 6 -- A mixed display. At times the Belgian kept the ball well under pressure, while at others he gave it away cheaply. There were occasions when he made useful challenges in front of his defenders, but also times when he was left behind.
MF Eric Dier, 6 -- Worked hard while switching between defence and midfield, but his passes were too often sideways or backwards.
FW Lucas Moura, 6 -- Always sought to be positive and take the game to City and he nearly played Kane in with a fine through ball, only to see the offside flag go up. He was also booked for diving though.
FW Erik Lamela, 7 -- Tenacious, aggressive and carried the ball purposefully while setting up a big chance when he played Kane clean through on goal. He missed one of his own though, firing over from 10 yards out with what was Spurs' best chance.
FW Harry Kane, 5 -- Missed his big chance, taking a heavy touch when running through one on one against Ederson. The pitch may have been a factor of course.
MF Harry Winks, 6 -- Provided fresh legs when he replaced Dier in the 67th minute.
MF Dele Alli, N/R -- Created a golden opportunity for an equaliser when he drove forward and presented the ball to Lamela in front of goal.
MF Christian Eriksen, N/R -- Entered the fray for the final 10 minutes in place of Lucas.