City won with goals from Mario Balotelli, Adam Johnson, Vincent Kompany and James Milner against his former club and moved on to 22 points from their eight matches, two points clear of United who are on 20.
Both City and United have Champions League matches next week before meeting in the Premier League at Old Trafford on Sunday.
City, without out-of-favour Carlos Tevez, the injured Sergio Aguero and with top scorer Edin Dzeko on the bench, were still far too strong for Villa, who suffered their first league defeat this season.
City manager Roberto Mancini told Sky Sports afterwards:“It’s normal when you return after the international break that you have a problem at the start of the game, but after that we started to play very well.”
Balotelli put City ahead with an overhead kick after 28 minutes—his fourth goal in his last four games and Mancini said: “I hope Mario continues like this.”
City had the match won by the 52nd minute when they were 3-0 up before Stephen Warnock pulled one back for Villa only for Milner to score with a brilliantly worked goal he started and finished.
They have now scored 27 goals in their opening eight matches, having won seven times and drawn once.
In the lunchtime kickoff at Anfield, Steven Gerrard, making his first start for seven months, put Liverpool ahead with a 68th minute free kick against United before substitute Javier Hernandez equalised for the champions with an 81st minute header five minutes after coming on.
Third placed Chelsea were playing Everton in a later kickoff (1630GMT) and could move to within a point of United if they win.
Bolton Wanderers moved off the bottom of the table when they ended a run of six successive league defeats with a 3-1 win at fellow strugglers Wigan Athletic, where they could even afford to miss a penalty through Kevin Davies.
Blackburn Rovers picked up only their fifth point of the season with a 1-1 draw at Queens Park Rangers who are still looking for their first home win, but the point was not enough to keep Blackburn off the bottom of the table.
Heidar Helguson put QPR ahead after 16 minutes before Christopher Samba headed Rovers level eight minutes later.
Norwich City maintained their good start with a 3-1 win over Swansea City in a battle of two of last season’s promoted teams at Carrow Road while Stoke City beat Fulham 2-0 at the Britannia with Jon Walters and Rory Delap scoring in the last 10 minutes.
Gerrard, returning for Liverpool after a complicated groin injury, struck with a 68th-minute free kick that went through the defensive wall after Rio Ferdinand had tripped Charlie Adam just outside the penalty area.
Hernandez, who came on as a 76th-minute substitute for Phil Jones, then nodded the ball into an empty net from point-blank range with nine minutes to go after Danny Welbeck had flicked on a corner.
“It wasn’t the best free kick,” Gerrard told Sky Sports. “I tried to get it over the wall but I got a bit of luck.
“To come back and play my first full 90 minutes today …growing up these are the games you dream of playing in and when you are sitting in the stands there is nothing worse, to be out there experiencing the emotions again was fantastic.”
United defender Ferdinand, who has also had a spell out injured, said: “It was great to be back and after losing here for the last three visits I’m pleased we’ve left with a point.”
The visitors started without Wayne Rooney, Hernandez or Nani up front although all came on in the second half.
Liverpool, buoyed by the return of Gerrard who had made three previous substitute appearances this season, had more possession and looked more dangerous as the match wore on and went close to a winner several times in the final minutes.
Rooney, who was handed a three-match ban for Euro 2012 by UEFA on Thursday following his England sending-off against Montenegro last week, came on for the last 20 minutes but made little impact, and United manager Alex Ferguson revealed why he left him on the bench afterwards.
“Wayne has had a bad week,” Ferguson told Sky Sports. “He’s devastated with the suspension. I must say that.
“When you think about it he could quite feasibly miss the European Championship because it’s never certain you’ll qualify from a group.
“It’s been a bad week for him, really. I felt with these circumstances that he’s better off starting from the bench.”
Rooney’s name received the biggest boos from the home crowd when the substitutes were read out and when he warmed up, as he not only plays for arch rivals United but is also a former player and fan of Everton, Liverpool’s city rivals.
However he remains the Premier League’s top scorer so far this season with nine goals.