An unfortunate Aideen Keane own goal in a backs-to-the-wall Wanderers performance proved enough to deliver Geoff Abrahams's charges their third straight win.
City, who have lost two consecutive games for the first time since January 2024, sit just two points clear of second-placed Wellington, who have a game in hand.
Defender Karly Roestbakken lamented City's inability to finish with 21 shots but just two on target.
"Really disappointing from us, it's not really our standards," Roestbakken told Paramount+.
Michael Matricciani's City will also sweat on an injury to defender Ellie Wilson, who got her left ankle caught underneath her in an awkward challenge in second-half added time.
The result lifts Western Sydney off the bottom of the table and into 10th, just four points outside the top six.
"Honestly i just think mentally we're in it and we believe in each other and we know we can do it," young gun Talia Younis said.
"It's just clicked and it's happening."
City, amid a tight schedule, benched golden boot leader Holly McNamara and star midfielder Leticia McKenna.
The Wanderers got away with one 16 minutes into the match when Amy Harrison clearly handballed Chinaza Uchendu's shot in the box but City's pleas for a penalty went unheard.
Western Sydney broke through in the 35th minute when Keane got her body positioning all wrong at the back post and chested Younis's corner into her own net.
"We just had to sit and wait for our moment, which was pretty good," Younis said.
In the 41st minute, New Zealand international Deven Jackson spurned a golden chance to equalise when she shot over the bar.
At halftime, City had 72 per cent possession and eight shots, but none on target to show for their dominance - compared to Western Sydney's one shot on target from three attempts.
City replaced Keane with McNamara at the break, seeking a spark.
Four minutes into the second half, City skipper Rebekah Stott grazed the top of the net with a long-range effort.
McNamara forced a save from Shamiran Khamis in the 88th minute, while the Wanderers goalkeeper comfortably handled an added-time McKenna effort.
Later on Wednesday, Sydney FC host Brisbane Roar.
City are next in action at home to Brisbane on Sunday, when Western Sydney play host to Adelaide United.
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