Pep Guardiola's men dominated their local rivals with a display of passing quality and attacking incision which reflected their spot atop the Premier League table.
David Silva bagged the first goal 12 minutes in and Sergio Aguero added another at the start of the second half.
Anthony Martial did breathe life into the away end at the Etihad Stadium as he slotted home a penalty after Romelu Lukaku was clipped by Ederson, but it was one comeback too many for Jose Mourinho's men.
After a silky move, Ilkay Gundogan produced a wonderful first touch and a second of supreme composure to seal Manchester City the win.
A carnival atmosphere ensued among the crowd in the closing stages as City passed rings around Manchester United's hapless defence and midfield.
There was a sprinkling of flamboyance too, as Raheem Sterling produced a few overzealous step overs, drawing some lunging tackles from the United players.
Guardiola took exception to his winger's fancy antics, however, storming over to Sterling at the full-time whistle.
The Spanish coach grabbed the 23-year-old – who signed a new bumper contract this week to become the club's highest earner – and proceeded to give him a firm dressing down.
The rant was caught by the TV cameras, as Guardiola can be seen passionately pointing and grabbing his player by the neck.
Sterling reacted slightly, pushing his boss away and questioning his vitriol.
Guardiola explained his actions in the post-match press conference, saying: "He made some movements with his legs that we could avoid.
Guardiola was delighted with the overall performance, however, aplpauding his side's composure after got one back.
"I like a lot when he played but the best way to defend a result is to keep the ball," said the 47-year-old.
"We spoke at half-time that we could play better and we were much better with the goal from Aguero after five minutes of the half.
"It was difficult, they defended so deep and they are aggressive, they follow man to man.
The win maintains City's position at the Premier League's summit, leading second-place Liverpool by two points.
Guaridola was quick to play down the significance of the side's current position, however, insisting there are an array of teams all competing in the title race.
"City right now, Liverpool and Chelsea and even Arsenal and Tottenham, they all have numbers to be champions," said Guardiola.
"But last season we didn't get points in Anfield. This year we drew.
The Spaniard's side are top for at least two weeks now, with the international break underway.
Defeat means United are as close to Cardiff in the relegation zone as league-leading City – a 12-point gap that was mentioned to Mourinho when asked whether their title hopes were over.
"I think we are not going to be relegated," the United boss said.
"So, when I analyse the game today, I think the difference was, you can go for stats.
"That's the way people that don't understand football analyse football, is with stats.
"I don't go for stats, I go for what I felt and I watch in the game and the game was there until minute 80-something.
"So, I consider the performance of my team a performance with mistakes. It's different than a bad performance.
"One thing is a bad performance another thing is a performance with mistakes.