United deal City title dreams a hammer blow
First half goals from Rashford (penalty) and Martial were enough to see Ole Gunnar Solskjaer's side to victory at the Etihad.
Manchester City's Premier League title hopes were in tatters after suffering a 2-1 derby defeat at home to Manchester United on Saturday, leaving Pep Guardiola's champions 14 points behind leaders Liverpool.
Man Utd hit City on the break
Goals from Marcus Rashford (penalty) and Anthony Martial put Ole Gunnar Solskjaer's side 2-0 up at the break and City only pulled one back in the 85th minute through Nicolas Otamendi.
United went ahead in the 23rd minute when a VAR review ruled that Bernardo Silva had brought down Rashford inside the box and the United striker kept his cool to convert from the spot.
Rashford missed a good chance to double the lead, curling wide from a promising position and with United ripping open the City defence the England forward struck the bar with a lofted shot from the edge of the box.
Martial grabs United's second
The second goal wasn't long in coming, however, Martial squeezing home a low, left-foot shot after a swift exchange with Dan James.
City felt they should have had a penalty before the break when Fred slid in to block a low pull-back from Kyle Walker with the home players feeling the ball struck his arm but the VAR review backed referee Anthony Taylor's judgement.
Guardiola's side were on top for most of the second half but it was not until the 85th minute when Otamendi headed in a corner that the hosts were able to find a way through.