Edin Dzeko and Aleksandar Kolarov both gave the visitors the lead before goals from Marcelo and Karim Benzema preceded the Portuguese's dramatic winner in the final minutes
All five goals were scored in the final 21 minutes. Edin Dzeko and Aleksandar Kolarov twice gave Manchester City the lead but Real Madrid equalized twice thanks to goals from Marcelo and Karim Benzema.
Dzeko came off the bench to give the visitors the lead after a surging run from midfield from Toure, but Marcelo quickly replied with a curling shot.
The home supporters were left stunned when Kolarov's free kick drifted untouched into the bottom corner of Iker Casillas' goal but Benzema again pulled Madrid back with a sublime turn and finish.
And Ronaldo ensured that Jose Mourinho's team put their early season woes behind them with a dipping shot that flew past both Vincent Kompany and Joe Hart.
Both Mourinho and Roberto Mancini and sprung selection surprises, although the latter made the more drastic changes following his team's poor start to their league campaign.
World champion Sergio Ramos was dropped from the Madrid defense, with 19-year-old Raphael Varane stepping in, while City handed a debut to the similarly inexperienced Matija Nastasic, with Joleon Lescott restricted to a place among the substitutes.
Mourinho has been unhappy with Mesut Ozil's start to the season but opted to replace the German with loan signing Michael Essien, of Chelsea, and not marquee purchase Luka Modric. Javi Garcia scored on his debut on Saturday and played again in midfield for the visitors.
With neither Ozil nor Modric in the starting lineup, Ronaldo roamed into the space left vacant in the center of the pitch and immediately looked the game's most threatening player. Hart was tested for the first time when the Portuguese raced on to Higuain's pass before fooling Kompany with a series of tricks and the England goalkeeper did well to palm the low shot wide.
Ronaldo continued to fire at will from the left side of the penalty area and Hart was called into action again when Higuain deflected another powerful shot with his head from close range.
The visitors gradually began to gain more of a foothold but could not get the ball to stick in attack and when they conceded possession, Real Madrid demonstrated its counterattacking prowess. Higuain could not quite control a superb pass dropped behind the City defense by Angel di Maria and Sami Khedira diverted Ronaldo's follow-up effort over the crossbar.
Two adventurous midfield runs by Toure began with promise but ended without troubling Casillas and Higuain went close again when he latched on to Di Maria's cross to the back post before the half was out.
It is difficult to imagine that in this, of all games, attacking quality would be in short supply but while both teams ventured into dangerous territory early in the second half, the finishing touches needed to open the scoring continued to elude them.
Mancini had already introduced Kolarov from the bench when Samir Nasri suffered a hamstring injury in the first half and with both benches littered with attacking talent, more changes seemed inevitable. Dzeko was next to take the field, replacing David Silva, and the Bosnian would provide the cutting edge that had been missing.
Toure, who had looked City's biggest threat all night long, broke out of the midfield again to create a two-on-one attack and this time successfully found his target with a simple through ball. Dzeko took the pass in his stride and beat Casillas with a composed, low left-footed finish.
Ozil had already been thrown into the fray and Modric and Benzema were quickly introduced as Mourinho sought to salvage something from the match, but Toure almost doubled the lead when released by Carlos Tevez, shooting narrowly wide.
The Spanish champions immediately looked more dangerous in the final third following the changes, though, and Marcelo curled a right-footed shot into the top corner after shaking off Kompany just outside the penalty area.
Set-pieces have troubled Madrid all season and after Pablo Zabaleta had failed to get contact on Carlos Tevez's low cross, Kolarov delivered a free kick that found its way into the back of the net after flying without interference past defenders and attackers alike.
Incredibly, though, there was more to come, and Mancini's celebrations on the sideline were short-lived. Benzema was next to strike after a mazy run from Di Maria, turning on the edge of the box and firing a powerful, low shot into the bottom corner.
And City's hearts were broken when Ronaldo stepped inside Zabaleta – who had relieved Maicon of his duties of marking the Portugal star – and released a dipping shot that beat the partially obscured Hart after Kompany had put himself in the way of the ball but failed to head clear.