The Brazilian playmaker pounced on City captain Vincent Kompany's poor clearance to curl home and put league leader Liverpool F.C. seven points clear of third-placed City, which has two games in hand, and on course for a first championship since 1990.
Driven on by its passionate support, Liverpool F.C. destroyed City early on with goals by Raheem Sterling and Martin Skrtel in the opening 26 minutes.
City produced a stirring second-half fightback, with David Silva scoring in the 57th before Glen Johnson's own goal five minutes later looked like snatching a point for the visitors.
Jordan Henderson was red-carded in injury time for Liverpool F.C.