Pep Guardiola's side twice squandered the lead at the Etihad Stadium as goals from Antoine Semenyo and Rodri were cancelled out by Morgan Gibbs-White and then Elliot Anderson.

Savinho had a shot cleared off the line by Murillo with the last kick of the game to compound City's frustration.

Their failure to kill off Forest was bad enough but the news from the south coast was even worse as a 1-0 win for leaders Arsenal at Brighton left the title race out of City's control.

Arsenal are now seven points clear of City and have the destiny of the title in their hands as they chase their first English crown since 2004.

City have a game in hand on the Gunners, who visit the Etihad in April but Guardiola will rue another game in which his side lost control in the second half.

Fourth-bottom Forest, meanwhile, are still to win in the league under new manager Vitor Pereira but on this evidence they have a fighting chance of survival.

City had started brightly and their pressure paid off in the 31st minute.

Rayan Cherki drifted into the box and crossed for Semenyo, who adjusted well to volley past Matz Sels from 10 yards.

It was his fifth goal in eight Premier League appearances since his move from Bournemouth.

Bernardo Silva forced a good save from Sels early in the second half and Cherki blasted over but City were rocked when Forest struck back after 56 minutes.

It came against the run of play as Ola Aina was allowed to break and cross from the right after outpacing Rayan Ait-Nouri.

Igor Jesus nodded down at the back post and Gibbs-White wrong-footed City keeper Gianluigi Donnarumma with an instinctive backheel.

City hit back powerfully, reclaiming the lead in the 62nd minute.

For all the talk of Arsenal's reliance on set-pieces in the title race, it was City who benefited from one on this occasion as Rodri got forward at a corner to bullet home a header from Ait-Nouri's cross.

Forest claimed Sels was impeded but their complaints were ignored.

However, City couldn't land the knockout blow and they paid the price in the 76th minute.

Anderson exchanged passes with Callum Hudson-Odoi and curled a superb finish into the bottom corner from outside the area to leave Guardiola stunned.