Just one point separated the two sides before kick-off
Arsenal rubbed salt into Manchester City's wounds after a miserable week with victory in a frantic Women's Super League meeting at Joie Stadium.
It is a boost to Arsenal's hopes of securing a top-three spot and qualification for next season's Women's Champions League.
Stina Blackstenius' late winner capped off the seven-goal thriller after City had battled to get themselves back into the game.
During a week when England international Chloe Kelly's loan move to Arsenal ended a turbulent transfer saga, this result sees City drop to fourth in the table.
Arsenal had taken a stunning 2-0 lead within eight minutes when Mariona Caldentey and Lotte Wubben-Moy punished City's weak defending.
Mary Fowler got one back for City before half-time and former Arsenal striker Vivianne Miedema drew them level minutes into the second half.
It was 2-2 for just 66 seconds though, with Arsenal's Frida Maanum immediately responding, before Fowler scored another equaliser from the penalty spot.
Steph Catley was adjudged to have brought down Aoba Fujino in the box by referee Cheryl Foster but the challenge may have been outside, while City had claims for a second penalty later on when Leah Williamson appeared to handball it.
But in the end, Blackstenius' goal sealed victory for Arsenal, who bounced back from their defeat by leaders Chelsea to move two points clear of City in the table.
Chaotic week for City gets worse
It has been a chaotic week for Manchester City with Kelly's loan move to Arsenal going through hours before the transfer window deadline closed on Thursday.
The England international's move was not a smooth one after she took to social media to say she just "wanted to be happy again" and that she did not see her future at City beyond the summer.
Manchester City boss Gareth Taylor later said it was "really disappointing" how the transfer saga had come to a bitter end.
Kelly was not involved at Joie Stadium as she was ineligible to face her parent club and did not travel with the Arsenal squad.
But City's week was set to get even worse.
Their response to going 2-0 down was admirable and they ended the first half the stronger of the two sides, halving the deficit through Fowler and putting Arsenal under pressure.
Summer signing Fujino was at the heart of their retaliation, creating chances and running at Arsenal's defence, who held off until the second half.
Another frantic 45 minutes followed as both teams attacked relentlessly and defended weakly, with City able to bring on firepower off the bench in returning top-scorer Khadija Shaw and January signing Kerolin.
But their introductions did little to turn the tide and Arsenal maintained a threat through Blackstenius and Caldentey in particular, missing further opportunities to extend their lead.
City fans voiced their frustration at the decision not to award a penalty when Shaw was closing in on Williamson and she appeared to control the ball with her hand, but Arsenal can have similar complaints at the one which went against Catley shortly into the second half.
With both clubs' title challenges seemingly over given Chelsea's substantial lead at the top of the table, this was an important match in the race to secure European qualification.
City are by no means out of it - there remain nine games to play and only two points separate Arsenal in second and City in fourth.
However, rivals Manchester United could move three points clear of Arsenal if they beat Tottenham later on Sunday (18:45 GMT kick-off).
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