The Gunners needed a late winner by Kai Havertz to beat Brentford 1-0.
Liverpool ended City's 23-game winning streak at the Etihad with a 1-1 draw, while Aston Villa won 2-1 at Tottenham to move into the top four.
Manchester United and Newcastle also secured big wins, over Everton and Chelsea respectively, to close in on the top four.
AFP Sport looks at three talking points from the Premier League weekend.
City leave the door open
City's bid for an unprecedented fourth consecutive English top-flight title appeared a formality when Pep Guardiola's men won their opening six games.
However, City have won just three of their last seven in the Premier League to leave the title race wide open.
The champions were left to rue not pressing home their advantage after Erling Haaland's 50th Premier League goal in a record 48 appearances opened the scoring.
Trent Alexander-Arnold's fine strike 10 minutes from time earned Liverpool a draw and kept Jurgen Klopp's men just one point behind their title rivals.
Guardiola admitted afterwards that City have missed the injured Kevin De Bruyne and the departed Ilkay Gundogan when it comes to finding the killer ball in the final third.
His side may well still have too much for their challengers come May, but some rare imperfections from the treble winners are helping foster a fascinating title race.
Reality check for 'swashbuckling' Spurs
On a day when Tottenham paid tribute to Terry Venables after their former manager's death aged 80, Spurs' current generation were unable to deliver a victory to mark the poignant occasion in north London.
Tottenham produced the kind of swashbuckling attacking play that Venables would have admired, but his old team lacked a cutting edge and crumbled too easily at the back and slipped to defeat to Villa.
Spurs were flying high at the top of the table less than three weeks ago after a superb start to Ange Postecoglou's reign in charge.
But a raft of injuries and suspensions to key players has hit hard as Tottenham have lost their last three games.
Villa leapfrogged Postecoglou's men into fourth, leaving Tottenham to lick their wounds ahead of a daunting trip to City next weekend.
Garnacho magic inspires Man Utd
Despite enduring a season of almost constant turmoil on and off the field, Manchester United find themselves just six points off the top of the table.
Erik ten Hag's men have now won five of their last six league games to rise to sixth.
But a 3-0 win at a febrile Goodison Park, as Everton fans voiced their anger at a 10-point deduction handed down by the Premier League, was the first time United have won a league game this season by more than a single goal.
Alejandro Garnacho's incredible overhead kick after just three minutes will go down as one of the all-time great Premier League goals.
What followed for the rest of the first half was more in keeping with the rest of United's season as Everton could and should have fought back but for wasteful finishing.
However, Ten Hag will have been heartened by Marcus Rashford scoring his first club goal since September and Anthony Martial making the most of a rare start to score the third ahead of a huge week.
The Red Devils must avoid defeat away to Galatasaray on Wednesday to avoid an early exit from the Champions League before a tough trip to Newcastle on Saturday.
