The Anfield showdown pits the season's two highest-scoring teams against each other, with the hosts currently topping the Premier League table on 74 points after 33 games. City are four points behind in third place, but with two games in hand over the Reds and second-placed Chelsea.
Speaking exclusively to FourFourTwo, Kompany explained that, with matters at the top so delicately poised, the fixture would captivate even those beyond Manchester and Merseyside.
"It’s a great game for neutrals," Kompany told FFT. "The Premier League is such a competitive league now, and it’s good there are different teams involved. For years it had been the same teams, but now it could be Liverpool, it could be City or it could be Chelsea. Obviously this game is a defining game and it's great to be involved. It will be difficult, but at the same time, if you do something special you will never forget those moments."
The match has been billed as make-or-break for the two clubs' title charges, but the Belgian defender believes City would be able to recover from a defeat – even though a win for Brendan Rodgers' Liverpool would leave the 2012 champions seven points off the pace with six games left to play.
"I think in our case we [would still] have some chance," Kompany explained. "Obviously the winners are favourites, we can be sure of that – but if we lose, I think we have more chance of getting back in it than they would [if they lost]."
Sunday's encounter will pit Kompany and his defensive colleagues against arguably the Premier League's most feared strikeforce. Luis Suarez and Daniel Sturridge have scored 49 league goals between them this season, but in a combined 11 matches against City throughout their careers, the pair have scored just twice.
Yet Kompany wasn't willing to divulge the secret of keeping 'the SAS' quiet.
"Let's talk about it after the game!" he joked. "I can only say I love playing in these games – this is what I live for. I want to play against the strongest and the best. I think it gets the best out of me – I'm looking forward to it.
"I love the pressure – it's something that I need. This game has all the ingredients so it's perfect. We'll play against strong strikers, strong players, a strong team. You never have the guarantee you will have a good game or you will win, but it is something worth fighting for and I like it that way."
The match will kick off seven minutes later than planned as a tribute to the 96 Liverpool fans who lost their lives in the Hillsborough disaster. The ill-fated FA Cup semi-final between Liverpool and Nottingham Forest – the 25th anniversary of which is next Tuesday – was halted after six minutes.
Kompany admits he knew little of the tragedy before moving to England. But the 28-year-old, who arrived at City from Hamburg in 2008, says he and his team-mates are ready to pay their respects on what is sure to be an emotionally charged afternoon on Merseyside.
"I didn’t know too much [about the disaster] until I came and lived in England," Kompany explained. "Then obviously you realise how much impact it has had on so many families. It’s a tragedy, not just for Liverpool fans, but for football in general and everybody associated with the game. So, like everyone else, we’ll pay our respects in that moment. It’s going to be an emotional game and an emotional week.
"All I can say is the best we can do for that moment is to give the fans a hell of a game. Whichever way it goes, we must play with passion."
