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PSG deservedly led at the interval through Marquinhos, but the second half was all about City as Kevin De Buyne and Rihad Mahrez struck to leave Pep Guardiola’s side on the verge of the Champions League final.
PSG captain Marquinhos gave the French champions an early lead with a glancing header off a pinpoint Angel Di Maria corner 15 minutes in - a just reward for Mauricio Pochettino's commitment to attacking the tie from the first whistle.
Neymar dazzled on the ball with Kylian Mbappe also tricky to contain, while City's zonal marking approach came undone on more than one occasion as they struggled to deal with whipped corners from Neymar and Di Maria on either flank.
Playing without a recognised striker yet again, City moved the ball about well but looked blunt in attack in the opening exchanges.
Phil Foden wasted a gilt-edged opportunity to level not long before half-time, but City's rising star blasted the ball at Keylor Navas after being given time and space to pick a finish from 20 yards out.
The half-time whistle brought a thrilling first 45 minutes to a close, and it was always likely that the second half would be a more cagey affair with PSG looking to deny City a valuable away goal.
As expected, City came out in the second half searching for an equaliser as PSG preferred to sit deeper and look to counter - and it took a slice of luck for the visitors to draw level.
De Bruyne took the game by the scruff of the neck for City, and a teasing cross from the left flank evaded everybody including PSG keeper Navas, bouncing to nestle in the corner of the net after 64 minutes.
City had their tails up and won a free-kick seven minutes later. De Bruyne looked likely to strike it from 25 yards, but Mahrez fooled PSG by striking through an awful wall to beat a furious Navas.
PSG lost their heads in the second half, and Gueye was sent off for a shocking lunge on Ilkay Gundogan.
The result leaves City in control of the tie, with PSG needing to score at least twice in Manchester to keep their Champions League hopes alive - though Guardiola may rue City not adding a third late on following Gueye’s dismissal.