Defeat would have seen the 2018 winners fall 10 points behind their rivals but the title race has now been blown wide open, with Tottenham also in the hunt, sitting two points further back in third.
Goalkeeper Ederson has confessed that the team were under pressure to produce the goods against Liverpool in front of their own fans and he hopes that now they can maintain that high level of performance until May.
"For us, it was a matter of life or death," Ederson told Sky Sports. "We knew the circumstances around the game - drawing or losing was not an option. We only contemplated winning, and we did a great game.
"It was our best game in the Premier League so far, and hopefully we will continue at the same level as of now."
City have won their last four games in all competitions to bounce back from a disappointing December, with a home clash against Wolves up next on Monday.
Ederson will retain his place between the sticks after a strong first half of the season, despite coming under the microscope at times for his unorthodox style in possession.
He went on to reveal that his team-mates were not impressed by his antics that day, but he stands by his methods.
"It was a play during the game," Ederson continued. "The forward was pressing high and it was over very quickly. It was my only resource at that time and I executed it well
"I got into the dressing room and my team-mates are telling me 'why did you dare to do that when we were 1-0 up?
"I told them that you need to have that personality and that calm as well and luckily it worked out very well."