Pep Guardiola's men -- chasing a seventh Premier League title in nine seasons -- can smell blood and are now favourites.
Liverpool appear to be on their way to ending their season with the consolation prize of a Champions League spot after their disastrous title defence.
At the other end of the table, Tottenham's plight looks increasingly bleak as rivals pull away from the drop zone.
AFP Sport looks at three talking points from the Premier League weekend:
Man City momentum
Manchester City are now in the driving seat as Arsenal's season continues to unravel.
Less than a month ago, the Gunners were on course for an unprecedented quadruple.
But four consecutive defeats in domestic competitions have ended their League Cup and FA Cup hopes and their Premier League challenge is faltering badly.
City, who face Burnley on Wednesday, would have been 12 points behind Arsenal had the Gunners beaten Bournemouth last week, at least temporarily.
They are still three points behind the long-time leaders but have a game in hand and, crucially, the momentum.
Arsenal's nerve has been questioned during their alarming slump, which has included defeats to second-tier Southampton in the FA Cup and Bournemouth in the league.
But fine margins decided the match in a much-improved performance at the Etihad on Sunday, with Arsenal ruing missed chances.
A familiar lack of killer instinct could come back to haunt them once more as Kai Havertz fluffed his lines, missing a glorious late chance.
By contrast, Erling Haaland pounced to score his 47th goal of the season for club and country.
Old guard eases Liverpool's pain
Everton started the Merseyside derby full of hope they could come out on top, but Virgil van Dijk's 100th-minute winner took Liverpool a giant step closer towards qualifying for next season's Champions League.
Less than a year after they won the Premier League, Arne Slot's future as Liverpool boss is in doubt after a miserable second season at Anfield.
Heavy defeats at the hands of Manchester City and Paris Saint-Germain to exit the FA Cup and Champions League have ramped up the pressure on the Dutchman.
But the Reds now look likely to seal a place in the top five -- they are seven points clear of sixth-placed Chelsea with five games left.
The poor form of Mohamed Salah and Van Dijk has been a major factor in Liverpool's drop-off this season, but the old guard stood up to be counted in the first derby at Everton's new Hill Dickinson Stadium.
The departing Salah scored the opener before Van Dijk nodded home to realistically end Everton's own challenge for Champions League football.
Tottenham's woes
Roberto De Zerbi has called on his beleaguered Tottenham players to "believe" as they fight tooth and nail to save themselves from a disastrous relegation.
But the club's situation looks increasingly bleak as they search for an elusive win and their rivals continue to pick up points.
Spurs conceded a stoppage-time equaliser in their 2-2 draw against Brighton on Saturday -- De Zerbi's first home game in charge.
If West Ham beat Crystal Palace on Monday, Tottenham will be four points from safety with just five games to play.
Nottingham Forest beat Burnley 4-1 on Sunday to lift themselves five points above the drop zone, while Leeds are now eight points clear.
Tottenham's match against bottom club Wolves next week is now an absolute must-win.