Carlos Tevez scored on his first start for City since September in a 4-0 win as the title race took a surprise twist with five matches remaining.
United were undone by Shaun Maloney's superb curling effort early in the second half of a match where refereeing decisions went against both sides.
Arsenal strengthened their hold on third spot and an automatic Champions League berth with a 3-0 win at 10-man Wolverhampton Wanderers, who prop up the table and look doomed to relegation.
Wigan enjoyed a bright start and Alex Ferguson looked worried, berating Wayne Rooney from the touchline on one occasion as United looked as lacklustre as they have all season.
Controversy struck when Victor Moses thought he had nodded Wigan ahead only for a linesman to harshly rule that Gary Caldwell had obstructed David de Gea.
Wigan were similarly stung by the officials at the weekend when Chelsea won thanks to two offside goals.
However, the hosts were not left to rue a decision this time after Maloney gave them a deserved lead.
An abject Rooney was substituted midway through the second half and United started to improve but the closest they came was a big shout for a penalty when Maynor Figueroa appeared to handle the ball.
Wigan held out and climbed up to 17th in the table, one place and two points above the drop zone, although fellow relegation candidates Queens Park Rangers won 3-0 at home to Swansea City to stop them reaching 16th.
City took an early lead through top scorer Sergio Aguero with a low shot to the bottom corner of the net and he doubled their tally after the break when he finished off Samir Nasri's pass.
Fellow Argentine Tevez scored soon after with a streaky effort.
Tevez had not begun a City match since refusing to warm up as a substitute at a Champions League match in September. A long stand-off and failed attempts to sell him ended in his apology and reintegration into the squad.
David Silva, off the boil in recent weeks, rediscovered his mojo to score a fourth as classy City celebrated news of United losing.
Arsenal endured a difficult start to the season but have really found their stride in recent weeks to outstrip north London rivals Tottenham Hotspur and become favourites for third.
They now have a five-point cushion over Spurs, who may have to settle for fourth place and a Champions League playoff if Newcastle United or Chelsea do not catch them.
An eight-minute sending off for Wolves defender Sebastien Bassong after a professional foul on Theo Walcott allowed Premier League player of the year favourite Robin van Persie to open the scoring with a dinked penalty.
Walcott struck himself soon after and Yossi Benayoun added the third in the second half to leave Wolves nine points adrift at the bottom.