Pep Guardiola's side needs a victory at the Etihad Stadium on Thursday to close the gap to Premier League leaders Liverpool to four points.
Despite two defeats in their past three games, Sterling is confident in City's chances against his former club.
As quoted in the Daily Mirror, he said: "If we can play the way we know we can play, we can beat anyone.
"It's going to be a great game and we're all looking forward to it."
However, they rebounded by beating Southampton 3-1 on Sunday and Sterling talked up the importance of that result.
"It's a massive step and just what we needed," he said.
"We had two poor games and we knew we needed to win to give ourselves a chance and we did just that. Our previous two results were difficult to take and I thought we bounced back brilliantly.
"I think we owed it to ourselves and as a team to bring that level we know we can bring."
Sterling is having a stellar personal season at the Etihad, registering 10 goals and nine assists in all competitions so far this campaign.
Last season was the England international's most profitable in front of goal so far, with 23 strikes in all competitions and 17 assists.