Talisman Mohamed Salah scored their first goal and set up Dominik Szoboszlai for the second as they went 11 points clear at the top on Sunday.
Arne Slot s side have 64 points from 27 matches ahead of second-placed Arsenal, who have a game in hand.
City are 20 points adrift of Liverpool in fourth spot on 44 as their early-season quest for a fifth consecutive title has unravelled into a chase for a Champions League berth.
Salah struck his league-leading 25th goal of the season in the 14th minute following a corner with a blistering shot from near the top of the box that deflected off the outstretched foot of City defender Nathan Ake past goalkeeper Ederson.
Szoboszlai took advantage of City s atrocious defending to double the lead in the 37th. Salah found the unmarked Hungarian in the box for an easy pass into the net to the dismay of City supporters, whose dismal mood was matched by the driving rain.
Thousands were gone before the final whistle, while the Liverpool fans gleefully sang: "We re going to win the league."
"Three days ago we had a draw at (Aston) Villa and people told me we weren t in a good place and then three days later we win and it changes again," Slot said.
"We work every single day to achieve this and it is three months of very hard work to maintain this. There is no secret."
SALAH SHINES
Salah has scored and assisted in 11 league matches this season, the most by a player in one campaign in Europe s big five leagues since Lionel Messi s 11 for Barcelona in 2014-15.
City, missing leading scorer Erling Haaland with a knee injury, held their own for much of the game, dominating possession with 66% to Liverpool s 34%.
It was Liverpool s lowest percentage this season and the lowest they have had in winning a match since the compilation of the possession statistics began 20 years ago.
The hosts had five shots on target to Liverpool s four.
City s Omar Marmoush, who bagged his first hat-trick for the club in their 4-0 thrashing of Newcastle United just over a week ago, thought he had scored with a sumptuous finish into the far corner in the first half but the offside flag went up.
The Egypt striker unleashed another shot that sailed just wide in the second half as City boss Pep Guardiola buried his head in his hands.
Curtis Jones whipped the travelling Liverpool fans into a frenzy with what he thought was a goal in the second period before it was ruled offside by VAR.
