Reds captain Steven Gerrard has featured in the last two matches as a substitute as he works his way back to full fitness. He scored the final goal of Friday's victory.
City were riding a two match winning streak in league play before they surprisingly drew to West Bromwich Albion 0-0 on December 26.
The two clubs drew 1-1 at Anfield back on November 27. Let's look at everything you need to know about this awesome matchup between English powers.
Where: Etihad Stadium, Manchester, England
Watch: ESPN2 and Sky Sports HD1
Live Stream: ESPN3.com
When: Tuesday, Jan. 3 at 3:00 p.m. ET
Player to watch for Manchester City: Sergio Aguero
In a match against a good club like Liverpool, Manchester City needs to score several goals. Forward Sergio Aguero is the club's best goal scorer and arguably their most talented player.
The Argentinian has scored 13 league goals this season which ranks third in the Premier League. Aguero has great pace and is one of the most accurate finishers in front of goal in all of Europe.
His dribbling skills are also world-class. He can keep his composure even when multiple defenders are around him.
Aguero is a match winner and certainly someone you must pay close attention to on Tuesday against the Reds.
Player to watch for Liverpool: Steven Gerrard
The Liverpool legend and captain has played in the last two matches as a substitute and looks ready to start on Tuesday against Manchester City.
Gerrard is one of the world's best midfielders and his combination of exquisite passing and timely goal scoring is so vital to the success of of the club.
When he came onto the pitch Friday against Newcastle, the team instantly became a better squad with Gerrard setting up quality scoring chances for his teammates, and even scoring himself.
Be sure to watch Gerrard against City and notice how much he effects the game.
Key Matchup: Battle of the Midfield
Both club's best players are in the midfield. Whoever controls the middle third of the pitch will control the match and have the best chance to take all three points.
City will want David Silva, Yaya Toure and Samir Nasri to dominate possession and excel in the playmaking role each of them performs so well.
Liverpool is hoping Gerrard, Charlie Adam and the in-form Craig Bellamy can break through the City midfield and set up scoring chances against City goalkeeper Joe Hart, who the Reds tested a lot in the November league match at Anfield.
Whichever club's midfield plays better will win the match.
What They're Saying
Steven Gerrard isn't worried about his team playing well against Manchester City on Tuesday, saying the following via Soccernet:
"They are a fantastic team who have started the season really well but we've got nothing to fear," Gerrard told liverpoolfc.tv.
"We showed against them here a couple of weeks ago that we more than matched them. These are exciting games, and these are the games as a player you want to play in. I can't wait.
"We've been very strong on the road. It's at home that we haven't got the results our football has deserved but we will go to City full of confidence. We will give it our best shot and see where it takes us."
Manchester City manager Roberto Mancini won't do anything to force striker Mario Balotelli to quit smoking, but he doesn't seem too happy about the situation, saying via Soccernet:
"For me it is not ok but I am not his father," he said. "If he were my son, I would give him a kick up the arse but he is not my son.
"I have told him it is better that he doesn't smoke because I am always against cigarettes and that's why my son doesn't smoke."
Prediction: Liverpool win 2-1
When Liverpool drew to Manchester City 1-1 on November 26 they were the better side in the second half. If not for some spectacular saves from Hart, the Reds could have won the match 2-1 or 3-1.
With Gerrard looking good after returning from injury, and with midfielder Craig Bellamy in form, Liverpool will pull off the upset and take all three points from the league leaders away from home.
Gerrard's presence in the team is so important and he really gives Liverpool a lot more attacking quality.
The Reds' defense has also not allowed two or more goals since September 18.
Liverpool's ability to defend goalkeeper Pepe Reina combined with Gerrard's attacking talent will carry the club past Manchester City with a hard fought 2-1 victory.