A spirited second-half fight back could not prevent us being eliminated from the FA Cup at the semi-final stage.
It brings to an end our run of 29 games unbeaten in open play in this competition, on a day when the side's recent punishing schedule eventually caught up with us, with our opponents starting the stronger and forcing their way into a two-goal lead.
Samir Nasri struck the opener after 34 minutes, lashing home from inside the area at the end of a period where Petr Cech had been the outstanding performer, saving excellently early on as Chelsea struggled to get onto the front foot.
Eden Hazard did see a half-volley cleared off the line prior to the opener, but City were good value for their half-time lead, and quickly added to it when Sergio Aguero headed home two minutes after the break.
From there it was always going to be an uphill battle, but Demba Ba fired a goal back on 65 minutes following the introduction of Fernando Torres , and the Senegalese twice came close to an equaliser, only to find stand-in City goalkeeper Costel Pantilimon in fine form.
And so our incredible run in this competition comes to an end. There are however two competitions where there remains everything to play for in the final month of the campaign.
As predicted, Rafael Benitez further rotated his side just three days after we had been in Europa League action in Moscow.
In came Branislav Ivanovic and Ryan Bertrand, who had recovered from illness, in place of John Terry and Paulo Ferreira at the back, John Mikel Obi for Frank Lampard in midfield, with Ramires dropping deeper in place of Nathan Ake. The three amigos, Juan Mata, Hazard and Oscar lined up behind Ba who replaced Torres. Cech wore the captain's armband.
City manager Roberto Mancini caused shockwaves with his decision to keep Pantilimon in goal ahead of Joe Hart, as he has done in this season's FA Cup campaign. Forward Carlos Tevez, who has inflicted damage to Chelsea in the past, started behind Sergio Aguero in attack.
In a sign of things to come, City took the early initiative, twice testing Cech inside the opening 10 minutes. First, he reacted brilliantly to deny Aguero from close range following a City corner, and then pushed a Tevez cross-shot behind.
There was help too from his defenders, as Ivanovic blocked from Aguero and then Bertrand from Tevez as the league champions threatened to overrun the European champions, dominating possession and territory as the Blues, playing in black, struggled to get to grips with the game.
Our first opportunity did, however, very nearly bring the first goal, when Hazard's volley bounced down into the ground and over Pantilimon, only for City captain Vincent Kompany to head off the line. It proved to be an isolated incident on a frustrating afternoon.
Chelsea's two central midfielders had been forced deep by City's creative forces, allowing Gareth Barry and Yaya Toure both to come forward, and it was from the Ivorian's driving run that City did take the lead. He fed Aguero on the edge of the box, and the Argentine slipped in Nasri who fired beyond Cech into the corner.
FA Cup semi
It was a goal that would have taken few by surprise given the 35 minutes that had preceded it, where Chelsea's key creators had been starved of possession in dangerous areas. Mata did flash a curling effort just past the post shortly after the goal, but it was City who should have scored once more when the ball dropped to James Milner 12 yards out. With Cech beaten, his shot struck an offside Aguero rather than the back of the net, and Chelsea were still in the game.
In injury time, Kompany should have ensured we were out of it. A Chelsea attack collapsed, allowing Milner to counter down the left into the box. Chelsea were outnumbered, but he crossed poorly, only for Cech to parry the ball out to Kompany, normally such a composed figure at the back, but he snatched at his shot and was way off target.
Within two minutes of the restart, City had doubled their lead with a goal Chelsea should have done more to prevent.
Barry and Milner exchanged passes out on the right with little pressure applied on them, and Barry's inswinging cross found Aguero, who had peeled off Ivanovic to send a looping header beyond Cech and in off the far post.
With a two-goal cushion, City could now drop deeper and Mancini switched their shape to a 4-4-1-1. With fatigue sure to prove a factor too, it was hard to see the Blues finding enough to get back into it.
With little impact made using our short passing game, we started to try the longer ball, but Ba was receiving little joy as a lone frontman up against Kompany and Matija Nastasic.
With 25 minutes to go, Benitez brought on Torres in place of Mikel, and instantly Chelsea scored. David Luiz's long ball evaded Kompany, marking Torres, and dropped into the area for Ba, who swivelled and despatched a well-placed finish beyond Pantilimon.
FA Cup semi
With the sub, Oscar had dropped deeper alongside Ramires, with Torres employed down the left flank. It was now game on. Chelsea had come back from two down against one Manchester side this season, and now there was a feeling they could do it again.
Hazard swept forward and suddenly Mata was in after Nastasic had slipped, but Pantilimon was quick from his line to pad the ball away from the Spaniard's toes.
FA Cup semi
More Hazard magic inside the area then set up Ba, but his well-struck effort was parried clear by the Romanian.
From being in complete control, City were on the ropes and being kept ahead only by their backup goalkeeper. Mancini called for deep midfielder Javi Garcia to replace Tevez. Toure shifted slightly forward.
Kompany saw yellow for a body check on Hazard, which allowed David Luiz a 35-yard free-kick. The Brazilian struck it well, but just off target. Twelve minutes remained.
A Mata pass from deep proved just too long for Torres after Kompany had misjudged its flight again, and then Torres won a header from Azpilicueta's cross, but could not connect powerfully enough to beat the goalkeeper.
Then Torres was through again inside the five minutes, but a combination of Kompany and sub Joleon Lescott managed to prevent him getting a shot away. There was contact from the Belgian, but no penalty award from Chris Foy.
FA Cup semi
Chelsea (4-2-3-1): Cech (c); Azpilicueta, Ivanovic, David Luiz, Bertrand; Ramires, Mikel (Torres 65); Hazard, Mata, Oscar; Ba.
Unused substitutes: Turnbull, Terry, Ake, Lampard, Benayoun, Moses
Goal Ba 66
Booked Ramires 46, Torres 85
Manchester City (4-4-2): Pantilimon; Zabaleta, Kompany (c), Nastasic, Clichy; Milner, Y Toure, Barry, Nasri (Lescott 86); Tevez (Javi Garcia 72), Aguero.
Unused substitutes: Hart, Kolarov, K Toure, Sinclair, Dzeko.
Goals Nasri 34, Aguero 47
Booked Barry 25, Y Toure 45, Kompany 77
Referee Chris Foy