Boss Manuel Pellegrini says victory over Liverpool is vital if Manchester City are to bridge the five-point gap between themselves and Chelsea.
Jose Mourinho's side will not be involved in the Premier League this weekend and the Citizens can close the gap on the Blues to just two points.
"It is very important to beat Liverpool and to continue winning in the Premier League, and continue fighting until the end to retain the title," Pellegrini said.
"As soon as we close the gap it is better for us. Of course it is important, and more than psychologically it is important mathematically.
"If we are going to have three points more, we are going to go two points behind Chelsea."
The Reds crashed out of the Europa League after a long match against Besiktas in Turkey and the Chilean admits fatigue could play a part in Sunday's game.
"If we think we are going to win that game because Liverpool arrived yesterday night late, that is not the reason," he said.
"But I have played in the Europa League and when you arrive on Friday it is not the best way to prepare for a game on Sunday - but that is the rules."
