Forest were the quickest off the blocks, with Morgan Gibbs-White testing City goalkeeper Gianluigi Donnarumma with a drilled low strike in the first minute of the match.
After a quiet opening twenty minutes City took charge and dominated possession and were duly rewarded when Ghana star Antoine Semenyo (30') fired his side ahead following Ryan Cherki's eight assists of the season.
The visitors almost equalized immediately but Igor Jesus' well placed shot forced a vital save from Donnarumma to preserve the Cityzens lead ahead of the half time break.
England midfielder Morgan Gibbs-White equalized ten minutes after the restart, slotting the goal in with a clever back-heel.
The home side looked to restore their lead, and it arrived seven minutes later with Spain star Rodri heading home from close range following a Rayan Ait-Nouri corner kick.
However, Forest refused to fold and rallied back to equalize through a wonderful low curling effort from Elliot Anderson in the 76th minute.
City tried everything to get a winner with Savinho having a shot cleared off the line with the very last kick of the game.
The result sees Man City slip seven points behind Arsenal on the Premier League table, while Forest move above the relegation zone into 17th spot.
"[There are] still many games to play, them [Arsenal] one less," said City manager Pep Guardiola after the match.
"Now it's Newcastle (in the FA Cup) and I always think about what's next. If we analyse then in general, it was a good performance and there were many good things. Of course, we have things we can improve but in general pretty good.
"There are games that maybe we don’t deserve it but today we play in general good for more than 90 minutes."
Michael Carrick has admitted the defeat "hurt" after his unbeaten start as Manchester United manager ended with a dramatic 2-1 loss against Newcastle United at St James' Park on Wednesday night.
Nuno Espirito Santo has praised a "special night" for West Ham United after his side secured a vital 1-0 victory over Fulham FC at Craven Cottage, a result that significantly boosted the club's hopes of avoiding relegation.
Igor Tudor has urged his Tottenham Hotspur players to channel their frustration into a strong performance as they prepare to face Crystal Palace, insisting the team must refuse to accept defeat as normal.
Mikel Arteta has brushed off criticism from Fabian Hurzeler after Arsenal strengthened their grip on the Premier League title race with a hard-fought 1-0 victory over Brighton at the Amex Stadium on Wednesday.
