The defeat sees Pep Guardiola's men drop to second, trailing Jurgen Klopp's Liverpool by a point on a damaging day for the Citizens.
City dominate early stages
Chelsea started the game cautiously, and looked nervous as they tried to work the visitors out - Sarri’s men knew it was crucial to win this game in order to have any shot at the title.
The home crowd quickly grew frustrated with their side, as Guardiola’s men appeared simply too good.
The first real chance of the game came on the quarter of an hour mark, as David Silva and Riyad Mahrez worked together to dispossess Eden Hazard inside of his own third, before playing through Leroy Sane, who fortunately for the Stamford Bridge faithful was unable to sort his feet out and find a finish. Warning signs early on.
Chelsea did fight back into the game, having more possession than possibly City are used to having to chase, although weren’t able to create any real openings.
Sane then had another chance on the half an hour mark, this time Raheem Sterling breezed past Marcos Alonso with ease down the right, before Cesar Azpilicueta brilliantly blocked the German’s effort as he struck from the edge of the box.
Chelsea rewarded for patience
City thought they had asserted their dominance on the game, and it appeared only a matter of time before they’d break the deadlock.
Then, on the stroke of half-time, N'Golo Kante fired Chelsea in front, completely against the run of play.
Hazard toyed with Kyle Walker and John Stones on the left flank, before picking out Kante on the edge of the box, as the Frenchman appeared to side-foot past Ederson - City made to pay for missed chances.
The goal seemed to do wonders for the confident of Chelsea, who needed the boost to take on the Citizens, who were unbeaten in the league prior to this one.
Willian tested his luck from distance twice at the start of the second 45, as City struggled to regain their momentum, allowing Chelsea a lot more time on the ball.
Wasteful City made to pay, again
It’s not often nowadays that this is said, but Guardiola’s City were wasteful in possession for large spells tonight.
Following the brief Chelsea onslaught, the away side stamped their authority on the game in terms of possession, although like the first-half was wasteful, and didn’t create nearly as many chances as you’d expect for the amount of time they had on the ball.
Chelsea again made City pay for their wastefulness, David Luiz heading home from a corner to sink the champions and any hope they had of going unbeaten this season.
The travelling support from the Etihad stadium could argue that there sides lack of creativity came from the absence of star men Kevin de Bruyne and Sergio Aguero, although nobody can say that there wasn't enough talent on the pitch for City to be able to turn possession into chances.
Chelsea back in the title race?
Before the start of this game, many had started to ask questions of Sarri and Chelsea, however, many of these critics will be reassured in the ability of the Blues following today's performance.
Before the start of the season, Chelsea were seen as 'outsiders' for the title, and this could now be seen as the case again as the Londoners proved that on their day they have the ability to beat anyone.
Liverpool now sit top of the league, a point clear of City, whilst Chelsea wait in the wings of the top two, should they slip - sitting seven points behind the champions as the packed winter schedule starts to take a toll.