After a goalless first 45, the hosts found the all-important breakthrough inside two minutes of the restart through Chloe Kelly’s clinical strike.
Lauren Hemp added a second, bundling home from close-range after Kerstin Casparij had seen her effort tipped away by Phallon Tullis-Joyce.
Former City forward Nikita Parris fired home in stoppage time to give United hope of an unlikely comeback, but it was too little too late.
Indeed, Taylor’s side gained the win we needed to leapfrog our rivals into top spot in Group B, booking our place in Friday’s last eight draw, and providing the perfect celebratory note on the ten-year anniversary of our professional relaunch.
What happened
With City, sporting our special Year of the Wood Dragon jersey, starting the day two points behind our opponents, the hosts knew that a win would guarantee top spot and a place in the quarter-finals.
But regardless of the potential permutations, both sides began with a real impetus, knowing local bragging rights were also at stake alongside qualification.
The first real chance fell to City, with Laura Coombs winning the ball in a 50/50 on the edge of the United box before sending an ambitious drive just over the bar.
But United were causing problems at the other end, with Nikita Parris forcing a smart reaction save from Khiara Keating at her near post soon after.
Indeed, Lucia Garcia was close to a spectacular opener when she picked Casparij’s pocket just inside the City half and attempted to dink Keating, but the effort was wide of the mark.
A significant blow would follow for Taylor’s side with Jill Roord forced off inside the opening ten minutes through injury.
But we regrouped, with the biggest chance of the first 30 falling to Bunny Shaw, who stole possession on the edge of the United box as they attempted to play out from the back, but Tullis-Joyce guessed right to make a smart reaction save.
The Jamaican went close again on the stroke of half-time, but snatched at an effort on the rebound and dragged it wide from a promising position.
But a first 45 which started brightly and then fizzled out slightly burst into life just before the break, with Lisa Naalsund calling Keating into action with a stinging drive before Kelly rattled an effort off the post.
The City winger wouldn’t be denied a second time though.
Inside two minutes of the restart, Kelly was first to a loose ball in the United box and, after cleverly feinting onto her favoured right foot, smashed home beyond Tullis-Joyce.
But we had to be alert to the danger at the other end, with Parris once again testing Keating with a powerful drive from a tight angle.
That glimpse of goal for United was an exception to the rule though, with City starting to gain a stranglehold on the game as the hour mark approached.
CITY v UNITED: BUY YOUR ETIHAD DERBY TICKETS
The visitors were thankful to Tullis-Joyce, who denied a goalbound Hemp volley, but will feel they should’ve equalised through substitute Ella Toone, with the former City forward sending a free header over the bar after going untracked.
And they were made to pay moments later, when we doubled our advantage with 20 to play.
A well-worked move down City’s right saw Kelly release Casparij on the overlap, with the Dutch defender trying her luck across goal.
The effort was parried away by Tullis-Joyce, but Hemp was first on the scene to tap home into an empty net and hand Taylor’s side the vital two-goal cushion.
United continued to knock on the door in search of an unlikely route back into the game, and halved the deficit through Parris in stoppage time.
One final chance fell to the visitors deep into stoppage time, but Melvine Malard’s effort on goal was expertly denied by Keating to see out a gutsy display, which was worthy of the memorable ten-year milestone it sat on.
Attendance: 4,818
Player of the Match: Chloe Kelly
Scorer of the first goal and instigator of the second, Kelly caused United problems all evening out wide.
Her intelligent runs and creative eye was the driving force behind a deserved and memorable win.
What it means
The win means City finish top of Group B, and therefore automatically qualify for the knockout stages.
United drop to second, but should reach the quarter-finals as one of the best placed runners-up.
How we lined up
Gareth Taylor named an unchanged side from the team who beat Liverpool 5-1 in the Barclays Women’s Super League on Sunday.
Khiara Keating started between the sticks, shielded by a back four of Kerstin Casparij, Laia Aleixandri, Alex Greenwood and Leila Ouahabi.
Yui Hasegawa sat at the base of our midfield three, with Jill Roord and Laura Coombs given licence to get forward and support the attack.
At the sharp end, Chloe Kelly and Lauren Hemp started on either flank, with Khadija ‘Bunny’ Shaw at centre-forward.
City XI: Keating, Casparij, Aleixandri (Houghton 85’), Greenwood (C) (Morgan 85’), Ouahabi, Hasegawa, Roord (Angeldahl 9’), Coombs (Park 76’), Kelly, Shaw (Fowler 76’), Hemp.
Subs: Roebuck, MacIver, Stokes, Mace.
United XI: Tullis-Joyce, Le Tissier, Blundell, Guerrero (Toone 66’), Zelem (C) (Ladd 76’), Evans, Naalsund, Garcia (Malard 76’), Turner, Parris, Williams (Geyse 66’).
Subs: Earps, Galton, Chadwick.
Up next
City are back in WSL action on Sunday 28 January away to Tottenham Hotspur.
Kick-off at Brisbane Road is set for 14:00 (UK) as we look to maintain our push for the title.
News about Man City v Man United
City 2-1 United: Short Highlights
A brief rundown of the action after City booked our place in the Conti Cup quarter-finals. Watch more
Full match replay: City v Manchester United Continental Cup
Watch the full 90 minutes of City’s Continental Cup clash with Manchester United on CITY+. Watch more
City’s confidence sky high after Manchester United win, says Casparij
Kerstin Casparij says City are full of confidence after booking our place in the Continental Cup quarter-finals with a deserved 2-1 win over Manchester United. Watch more
City 2-1 Man United: Pitcam highlights
Watch our Conti Cup win over United from a totally unique angle... Watch more
City 2-1 Manchester United: Classic Highlights
To mark the arrival of City and England winger Chloe Kelly on this day in 2020, here's a memorable Manchester derby from last January... Watch more
Houghton: Nice that Manchester stays blue
Steph Houghton was thrilled to help City through to the Continental Cup quarter-finals with a 2-1 victory in the latest derby with United, stressing post-match: ‘It’s nice that Manchester stays blue’ Read more
Taylor hails quality of City's goals in Manchester United win
Gareth Taylor has hailed the standard of Manchester City’s goals in our deserved 2-1 win over Manchester United in the Continental Cup. Watch more
Taylor: City never give in
Gareth Taylor believes his side have developed a gutsy determination to see out results following our 2-1 win over Manchester United in the Continental Cup. Read more
Match gallery: City 2-1 Manchester United
View the best images from City’s deserved 2-1 win over Manchester United in the Continental Cup. View more