The round of 16 match in Orlando finished 2-2 at full-time but at the end of an eventful extra time, Marcos Leonardo grabbed the winner and pulled off one of the greatest wins in Middle Eastern football history.
The Saudi club advance to the quarter-finals where they will face Brazilian club Fluminense, ensurg a non-European team will reach the last four.
City had taken the lead in the ninth minute in controversial fashion, Bernardo Silva finishing after Rayan Ait-Nouri’s cross.
Al Hilal players protested Ait-Nouri had controlled with his arm in the build-up but the goal stood.
City had plenty of opportunities to extend their lead before the break but a combination of poor finishing and inspired goalkeeping from Moroccan goalkeeper Yassine Bounou kept the lead at a single goal.
Al Hilal offered several reminders of their threat on the break but City also had more chances, with Jeremy Doku volleying straight at Bounou who moments later reacted superbly again to keep out a Bernardo effort.
The question as to whether City would live to regret not converting those chances was answered within a minute of the resumption.
Former City full-back Joao Cancelo’s low cross was parried out by Ederson, Malcolm pounced but saw his shot blocked by Ruben Dias only for the ball to loop to Marcos Leonardo to head home the equaliser.
Six minutes later and City’s high defensive line was exposed by a long ball from Cancelo which Brazilian Malcolm raced on to, and he showed power and pace as he broke away before coolly slotting past Ederson.
The Saudi fans in the crowd went wild while Pep Guardiola responded immediately with a triple substitution with midfielder Rodri and defenders Nathan Ake and Manuel Akanji introduced.
That brought some much-needed stability to a shaky back line but City needed improvement at the other end too and it came, albeit in scruffy circumstances.
The Al Hilal defence were unable to deal with a Bernardo corner and Erling Haaland pounced to steer home the loose ball and make it 2-2.
Al Hilal had a deep well of spirit to draw upon and just four minutes into the opening period of extra time, the Saudi side regained the lead when Kalidou Koulibaly rose superbly to meet a Ruben Neves corner with a brilliantly angled header.
City responded with a goal of real quality when Rayan Cherki’s floated ball towards the back post was poked home masterfully by Phil Foden, at full stretch and from the tightest of angles.
But incredibly Al Hilal responded again to restore their lead — Sergej Milinkovic-Savic’s header was saved by Ederson but Marcos Leonardo followed in to bundle the ball over the line.
As the celebrating Al Hilal fans poured out of the stadium after the final whistle, the Brazilian striker let his emotions pour out.
“I’ve had a difficult time in the last two months. My mother spent 70 days in the ICU,” he said.
“Today she’s fine, thank God. When I scored those two goals, I thought of her. She was able to watch the match.” (AFP)