Trent Alexander-Arnold's fine strike 10 minutes from time salvaged a point for the visitors after Erling Haaland's 50th Premier League goal put City in front.
A share of the spoils means there remains just one point between the sides and that Arsenal can now take top spot from City if they win at Brentford later on Saturday.
Liverpool boss Jurgen Klopp made his displeasure clear at the early kick-off time on the back of an international break where both sides had players in World Cup qualifying action in South America little over 72 hours ago.
Fatigue appeared a factor as the expected fireworks failed to materialise.
"Preparing for the most difficult game of the season with one (training) session is really a challenge," said Klopp.
"We’re still in a process. If we’d played really well today, we could have won – we didn’t. We played ok."
City boss Pep Guardiola lauded the manner in which his side restricted a free-scoring Liverpool to precious few chances.
But the English champions lacked precision themselves in the final third and were made to pay for not building on their lead.
"I am really proud that after eight years we are still playing that way," said Guardiola. "We were really good in all departments and needed to be against an incredible team.
"Maybe we missed the last pass a little bit but they defended really well."
Alisson escapes
Alisson Becker was let off the hook by Phil Foden's weak shot after the Brazilian gifted away possession inside his own box.
But the Liverpool goalkeeper was not so fortunate when his next sliced clearance picked out Nathan Ake.
The Dutch defender dribbled forward before picking out Haaland, who found the far corner on 27 minutes.
Haaland's 50th Premier League goal in his 48th appearance smashed the previous record for the quickest half century held by Andy Cole in 65 matches.
At the other end, Darwin Nunez was Liverpool's biggest threat as Mohamed Salah failed to build on his impressive record against City.
Ederson clawed away Nunez's first-half header and turned a powerful effort behind at his near post after the break.
But it was City who had looked the more likely to add to their lead in the second half as Liverpool struggled to contain the speed of Jeremy Doku on the counter-attack.
The Belgian winger teed up Julian Alvarez with a glorious chance that the Argentine spooned over.
Alisson was handed another let-off 20 minutes from time when he spilled a corner under minimal pressure from Manuel Akanji and Ruben Dias tapped home.
However, a VAR check did not overturn the referee's on-field decision to award the Liverpool 'keeper a soft free-kick.
Instead it was the Reds who hit back against the run of play when Salah laid the ball into Alexander-Arnold's path for a fantastic finish into the bottom corner.
City pushed for a winner and were inches away when Haaland headed wide in eight minutes of added time, but they were thwarted as Guardiola's men failed to win at home for the first time since December 31 last year.
Tensions then boiled over after full-time when Klopp had to pull Nunez away from an altercation with Guardiola but both coaches played down the significance of that incident.
