Sergio Aguero was the star of the show with his 10th Premier League hat-trick, and all of his goals came from close range as Man City ultimately cruised to a victory which takes them back above Tottenham Hotspur and into second place.
Arsenal were level for much of the first half after Laurent Koscielny had cancelled out Aguero's opening goal, but they were comfortably second best over the course of the full 90 and remain in sixth place having seen both Chelsea and Manchester United win earlier in the weekend.
City's focus will now switch to Liverpool's trip to West Ham United on Monday night, where the Reds will be hoping to restore their five-point lead over the champions.
Both managers made interesting team selections as Arsenal opted for a 4-4-2 with Sead Kolasinac in midfield ahead of Nacho Monreal, while Pep Guardiola used Fernandinho at centre-back with Aymeric Laporte on the left and John Stones on the bench alongside Danilo and Fabian Delph.
Laporte's advanced position paid immediate dividends as he provided the assist for the opening goal, which came after only 48 seconds from the same man that scored after 24 seconds against Newcastle United in midweek.
Arsenal failed to clear their lines from Man City's first attack of the game and Aguero was waiting in the middle to steer his diving header past Bernd Leno, providing the season's second-fastest goal just five days after also scoring the quickest.
Guardiola would have been wary that his side failed to build on such an early advantage against Newcastle, but that initially did not look like being the case in this match with Raheem Sterling stinging the palms of Leno before Laporte saw a goal correctly ruled out for offside.
However, having struggled to even get out of their own half during a one-sided opening 10 minutes, Arsenal suddenly levelled things up against the run of play when Monreal's flick-on from a corner was converted from close range by Koscielny.
It was a goal which completely changed the game as Man City - who looked on course for a rout in the opening 10 minutes - suddenly found themselves finding it difficult to create chances against an Arsenal side with every player defending deep inside their own half.
Nicolas Otamendi did draw a save from Leno with a deflected strike before Kevin De Bruyne fired a volley over the crossbar, but Arsenal slowly began to grow into the game despite surrendering the lion's share of possession and territory.
Indeed, the visitors threatened to take the lead themselves towards the end of the first half with a couple of dangerous counter-attacks, one of which led to Kolasinac drawing a save from Ederson after being allowed the space to turn and shoot inside the area.
It was City who got the goal just before half time, though, and again it was Aguero who scored it. Sterling dropped the ball back to Ilkay Gundogan before darting into the area and latching on to the chipped return pass, playing a perfectly-weighted volley across the face of goal to leave Aguero with the simplest of finishes.
The hosts almost added a third before the interval too as Bernardo Silva linked up with De Bruyne, who fired a cross/shot just past the far post and narrowly too far in front of Sterling sliding in.
Arsenal ensured that they reached half time still in the game, though - and perhaps unfortunate to be behind - although they offered very few signs of another equaliser throughout a one-sided second half as City's goal just before the break seemed to take the wind out of the visitors' sails.
De Bruyne was denied twice from range in quick succession by Leno in the opening stages of the half before having a clearer chance thwarted by the Arsenal shot-stopper, who saved with his legs after De Bruyne had been found by Sterling inside the area.
City did get their third goal shortly after the hour mark as Aguero completed his 10th Premier League hat-trick with another close-range finish, although Arsenal felt that it should have been disallowed for a handball against the Argentine.
Replays showed that the ball did indeed come off his arm last as he slid in to convert another low pass across the face of goal, bundling it over the line before either Leno or Koscielny could hook it clear.
Only Alan Shearer has now scored more Premier League hat-tricks, while Aguero has 14 across all competitions for City, and he almost made it a four-goal haul when he forced a one-handed stop from Leno with 14 minutes remaining.
Arsenal were able to hand new loan signing Denis Suarez a debut against his former club, but that was about as much as they had to cheer in the second half as Man City cruised to all three points.
Liverpool will have their turn to respond when they face West Ham on Monday night, although City could reduce the deficit on a slightly more permanent basis when they take on Everton on Wednesday in a fixture rearranged due to their involvement in the EFL Cup final.
Arsenal, meanwhile, now sit sixth in the table having begun the weekend in the final Champions League spot.
MAN CITY (4-3-3): Ederson; Walker, Fernandinho, Otamendi, Laporte; De Bruyne (Mahrez 88'), Gundogan, Silva; Bernardo, Aguero (Jesus 81'), Sterling
ARSENAL (4-4-2): Leno; Lichtsteiner, Mustafi (Mavropanos 79'), Koscielny, Monreal; Iwobi (Ramsey 66'), Torreira, Guendouzi, Kolasinac (Suarez 66'); Lacazette, Aubameyang
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