Mark Hughes gained sweet revenge for his dismissal as City manager 14 months ago by virtually ending their title challenge.
Damien Duff's leveller just after half-time was enough to deny the Blues victory, leaving them 10 points adrift of leaders Manchester United, having played a game more.
And ill-feeling between Blues' bosses past and present erupted with an angry exchange at the final whistle, when Roberto Mancini did not appear to look at his predecessor at the post-match handshake, leading to Hughes pulling his hand away in disgust.
Mancini has far more to worry about.
If Tottenham and Chelsea win their games in hand, City will find themselves outside the top four.
And, having complained so often about the huge number of fixtures his team are having to play, Mancini must be concerned about how meekly they faded once the Cottagers had levelled Mario Balotelli's ninth goal of the season.
Having let a number of squad men leave on loan, Mancini now finds injury robbing him of others and far better will be required on Wednesday if City are to dispose of Aston Villa to reach the FA Cup quarter-finals.
Fulham headed north boasting a proud record of just one defeat in their last seven league encounters at City.
The most famous, a 3-2 win three seasons ago after the Blues had taken a two-goal lead, saved them from the drop.
These days, City are a far stronger outfit, as Fulham boss Mark Hughes could testify given he was sacked 14 months ago because owner Sheikh Mansour felt the Welshman had fallen marginally short of the exacting standards he was set.
Hughes' successor Roberto Mancini is doing better, although he has spent another huge pot of money to achieve it.
Yet, with David Silva missing due to an ankle problem and City in the middle of what could turn into 15 matches in seven weeks, the hosts were a lacklustre during the opening stages.
Balotelli went close on a couple of occasions but so did Fulham, whose skipper Danny Murphy watched his rising drive fly over midway through the half.
With the atmosphere flat as well, City needed something to raise them.
For once, Carlos Tevez, sporting a tight perm, was outdone, both in the fashion stakes and who should score.
Balotelli's 'Mr T-style' dyed blonde hair was fairly distinctive. His goal was better.
Exchanging a couple of short passes with Tevez, the Italy striker was given too much room by Murphy and promptly despatched an excellent shot past Mark Schwarzer.
Had Aleksandar Kolarov showed even a small amount of awareness when he streaked into the box minutes later, City would have had a second.
Instead, the Serbian ignored a posse of expectant team-mates, smashing a shot into the side-netting from an impossible angle.
Fulham kept battling, although there was rather too much aggression from Clint Dempsey, who after engaging in bad-tempered exchanges with Gareth Barry, Yaya Toure and Pablo Zabaleta, was summoned by referee Peter Walton to receive a lecture from Murphy.
But Dempsey's attitude belied a fierce Fulham determination. And within two minutes of the restart they were level.
The execution was simplicity itself.
Brede Hangeland sent Andrew Johnson flying down the right wing.
The former Everton star galloped on a few paces before drilling a cross low into the area, which Duff arrived with perfect timing to tuck home from close range.
As City's response was limited to a Balotelli mis-kick after Zabaleta had taken advantage of Hangeland's slip to pull a cross back to the near post and holes were appearing with alarming regularity in the hosts' midfield, Edin Dzeko was sacrificed as Mancini abandoned his three-man attack.
The extra solidity Patrick Vieira brought to midfield nearly paid dividends too as Balotelli lifted a pass over the Fulham defence to release Tevez.
Mark Schwarzer got his angles right though, pushing the South American's effort just wide.
The veteran Australian needed every inch of his massive frame to touch a dipping Kolarov effort over as City began to build up some momentum, although as it turned out, Fulham looked more plausible winners in the latter stages.
Dempsey and Dembele both went close as Duff terrorised the City defence from his right flank station.
Balotelli suffered the ire of his own supporters when he blazed over two minutes' from time, which proved to be City's last chance.