Pep Guardiola made six changes from the side that beat Brentford 3-0 at the weekend, with Erling Haaland and Jeremy Doku among those on the bench, while Palace boss Oliver Glasner also made tweaks.
First-half goals from Antoine Semenyo and Omar Marmoush put City in control at a damp Etihad and a late strike from Savinho added gloss to the scoreline.
The tide appeared to have turned in City’s favour in the title race over recent weeks but last week’s costly 3-3 draw at Everton put Arsenal firmly back in the box seat.
The City players experienced the agony of seeing a stoppage-time equaliser for West Ham against Arsenal ruled out following a VAR check on Sunday as the Gunners battled to a 1-0 win.
City opened the scoring in style in the 32nd minute after Phil Foden produced an exquisite back pass to set up Semenyo, who finished coolly past Dean Henderson into the far corner of the goal.
They doubled their lead eight minutes later, with Foden again the provider, touching the ball to Marmoush, who celebrated his third Premier League goal of the season.
John Stones, departing at the end of the campaign, came on as a substitute towards the end of a forgettable second period to a rousing reception.
Minutes later Rayan Cherki ran with the ball from his own half before setting up Savinho, who swept the ball past Henderson.
The three-goal win takes City to 77 points, two behind Arsenal. City now have a superior goal difference of plus one and have scored seven more goals.
City take on Chelsea in the FA Cup final at Wembley on Saturday, gunning for a domestic cup double after lifting the League Cup earlier this season. (AFP)