Goals from Jhon Duran and Morgan Rogers at Villa Park on Saturday consigned the four-time defending champions to a ninth defeat in 12 games, with Pep Guardiola's side having won just once during that run.
Phil Foden did pull a goal back for City in stoppage time, but it wasn't enough to spark a late comeback.
"We have to stay positive, even though it's difficult, and we have to keep working hard," City striker Erling Haaland said.
Jhon Duran celebrates Villa's opening goal in their deserved win over a flat City. (AP PHOTO)
City have dropped to sixth in the standings — nine points below leaders Liverpool, having played two games more.
Impressive Villa climbed to fifth but all the focus was on City's remarkable fall, which shows little sign of stopping.
Guardiola admitted last week that he had not been good enough to turn his team's form around and the latest defeat means his once dominant team are now without a win in any of their last eight away games in all competitions.
While their title defence unravels, a place in the top four and Champions League qualification could also be in jeopardy.
"We concede the goals we don't concede in the past, we don't score the goals we score in the past," Guardiola said.
"We have to think positive and I have incredible trust in the guys. Some of them have incredible pride and desire to do it. We have to find a way, step by step, sooner or later to find a way back."
A sixth league defeat is City's worst record since the 2020-21 season.
Only once under Guardiola have City managed to win the title when losing six times in the league. That was in 2020-21, when they lost two of their last three games, having already been confirmed champions.
City lost nine times when Liverpool won the title in '19-20, but their sixth defeat didn't come until the February of that campaign.
Guardiola also lost six times in the league in his first season in English soccer in '16-17 when City finished third.
It could have been worse for City as Villa dominated the game with Duran scoring his sixth goal in as many starts in the 16th minute from Rogers' assist.
Villa had a goal disallowed for offside in the second half and Rogers hit the post before doubling the home side's lead in the 65th.
Nottingham Forest's Anthony Elanga scoring their second in the win at Brentford. (AP PHOTO)
If City's demise is the surprise story of the season, then Forest's rise isn't far behind.
After battling relegation for much of last term, they're in contention to qualify for the Champions League and possibly more.
Facing a Brentford team that was unbeaten at home, goals from Ola Aina and Anthony Elanga secured another statement win on the road for Nuno Espirito Santo's side, having already won at Anfield and Old Trafford this year.
Alexander Isak hit a hat-trick in Newcastle's 4-0 win at Ipswich. The Sweden international, who has 10 goals in his last 11 games, wrapped up his treble inside 54 minutes at Portman Road, while Jacob Murphy also scored.
Brighton were 1-0 up at West Ham through Mats Wieffer, but Mohammed Kudus levelled for the draw.
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