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First-half goals from Sergio Aguero, courtesy of a bad error by Liverpool goalkeeper Pepe Reina, and Yaya Toure allowed City to continue its remarkable home form.
City lost midfielder Gareth Barry to a 73rd-minute red card, for a second bookable offense, but within a minute it added a third goal courtesy of a James Milner penalty.
The calendar year of 2011 saw City collect 52 points from a possible 54 on its own ground and, after one point from its last two away fixtures, Roberto Mancini's team relished the return to home turf.
Liverpool was without Luis Suarez, after announcing before kickoff that it will not appeal the eight-match suspension handed to him for racially abusing Manchester United's Patrice Evra.
But City were left with personnel problems of their own with Yaya Toure, along with brother Kolo, leaving the club after Sunday's FA Cup tie with Manchester United to represent the Ivory Coast in the African Cup of Nations.
"I tried to find another Yaya in the squad but there isn't another one," Mancini said. "For us he is a very important player and for this reason January is a crucial month for us.
"If we can stay at the top in January, we could win the title but we play every three days and will be without Yaya, without Kolo.
"I think United are a strong team but we should think only about ourselves, try to win every game and see what happens in the end. It will be a hard championship from now until the end because also Tottenham are very close."
Liverpool created the first real opening after just seven minutes when Jordan Henderson's accurate throughball played in Stewart Downing only for the winger to be denied by a fine reaction save from Joe Hart.
That miss proved especially costly when City took the lead in the 10th from a move started when Milner dispossessed Dirk Kuyt and found David Silva with a short pass. The Spaniard fed Aguero, whose 20-meter shot passed under Reina's diving body into the back of the net.
After 33 minutes, Liverpool's run of just one defeat in 17 previous games looked like being under severe pressure as the home side doubled its lead through Toure.
Reina made amends for his earlier blunder by tipping over a goal-bound Vincent Kompany header from a Milner corner.
Silva took the resulting right-side flag kick and found the unmarked Toure, who guided in an unstoppable header via the underside of the crossbar.
While Liverpool threatened on the counterattack, the two-goal lead did not flatter City.
An Edin Dzeko shot was barely saved by Reina at the foot of his post and Aguero's audacious chip, soon after his opening goal, forced Reina into a solid piece of handling.
For its part, City was rarely tested with Hart's save from a strong Charlie Adam free kick a rare piece of first-half activity for the England goalkeeper.
Even though the visitors brought on the experienced Steven Gerrard and Craig Bellamy before the hour mark, there was little hope of recovery until Barry, booked for a first-half foul on Jay Spearing, brought down Daniel Agger and was sent off.
However, within a minute, Skrtel body-checked Toure to the ground and Milner confidently planted his penalty kick high into the right side of the goal for 3-0.
Mancini was seen gesturing for the referee to send off Skrtel for the challenge, and apologized for the action.
"I did it because I was nervous," Mancini said. "Maybe I made a mistake by doing it but I didn't agree with the referee for the second yellow card (for Barry). I watched all the games yesterday and there were lots of tackles without any yellow or red cards and we play a game and we lose a player."
City substitute Adam Johnson struck the post from 18 meters while Hart's only other business was to save from a long-range Bellamy shot late in the game.
