Everton's 2-1 victory at Eastlands denied Manchester City fans the chance to celebrate Carlos Tevez's decision to stay.
Everton defeat denies Man City top spot
Everton's surprise 2-1 victory denied Manchester City the chance to celebrate Carlos Tevez's decision to stay at Eastlands by moving to the top of the Premier League.
David Moyes' side took a two-goal lead through Tim Cahill and Leighton Baines inside 20 minutes.
City pulled one back through Phil Jagielka's own goal after Everton striker Victor Anichebe was sent off with an hour gone, and though the hosts pushed hard for an equaliser, they found Everton's defence and goalkeeper Tim Howard in commanding form.
"He's been the man not just this season but all the other seasons as well," Cahill said of Howard. "There's times in games when we look to him to get us out of it and tonight he did that."
City defender Kolo Toure was sent off in added time for a second booking in quick succession.
City therefore missed the chance to be top of the table at Christmas for the first time since 1929, meaning that honour goes to rivals Manchester United, who lead Arsenal by two points. Roberto Mancini's City remain third, behind the Gunners on goal difference.
"We are frustrated because we had a big chance to go top after 18 games," Mancini said. "It was a fantastic thing but now we must restart the season, and it's long.
"We have to understand that we can't sleep when we play this game then maybe we can go to the top in the future."
Everton move up to 14th after only their fourth league win of the season, and second away from home.
"There's a big smile tonight, I feel terrific," Moyes said. "I thought the players did me proud tonight, the way they kept at it."
City started the game in high spirits after the announcement that Tevez had settled his differences with the club and withdrawn his threat to leave.
Everton had not won since the end of October, but they began the game full of confidence and took the lead in the fourth minute.
Anichebe, who has scored just once in 27 months, failed to turn a header on target from a cross from the left from Baines, but the ball fell for Seamus Coleman and he picked out Cahill at the near post for the Australian to score with a header for the third consecutive season at Eastlands.
In the 11th, City produced their first opening when Yaya Toure lifted a pass to the far post but David Silva could only find the side netting with his shot.
But while Pablo Zabaleta was off the field receiving four stitches in his head following a collision with Cahill, Everton doubled their lead in the 19th.
Baines broke forward and after Anichebe's cross was laid off by Cahill, the leftback curled a shot into the corner with his weaker right foot.
City were dominating possession and had Mario Balotelli volley over from an Aleksander Kolarov corner before Howard tipped away a Kolarov free kick.
Adam Johnson replaced James Milner at half time and City continued to threaten, with Kolarov going close with two efforts from long range.
Everton, already being forced deeper and deeper, went down to 10 men in the 60th. Anichebe had been cautioned for a challenge on Joe Hart and David Moyes was about to bring on Louis Saha, but the forward caught Zabaleta five minutes later and was shown a second yellow card.
In the 72nd, the hosts finally pulled one back when Yaya Toure's shot flicked off Jagielka and just inside the far post.
City came agonizingly close to an equaliser in the 77th when Yaya Toure freed Balotelli only for the Italian's clipped shot came back off the post before Howard pulled off a fine block from Tevez on the follow-up.
Balotelli later limped off with a knee injury and City's hopes of salvaging a point all but disappeared when, moments after he was shown a yellow card for a challenge on Phil Neville, Kolo Toure was dismissed in added time for a foul on Diniyar Bilyaletdinov.