Mark Hughes' big-spenders successfully negotiated their last 32 tie with FC Copenhagen, with a Craig Bellamy brace sealing a 2-1 win on the night at Eastlands and 4-3 triumph on aggregate.
But the Blues became the last British team standing in the competition following defeats to weakened sides put out by both Aston Villa and Tottenham Hotspur - who are challenging at either end of the Premier League table - while favourites AC Milan crashed out to Werder Bremen on away goals.
The German side rallied from 2-0 down at the San Siro to level at 2-2 through two goals from, former Bayern Munich and Chelsea striker, Claudio Pizarro, with the tie ending 3-3 on aggregate after Diego had netted a last-gasp equaliser in Germany a week ago.
Manchester-based bookmaker Betfred have now set odds of 4/1 for City to go all the way and lift the trophy in Istanbul in May, with Sky Bet offering 3/1.
CSKA Moscow, 2-0 winners on the night against Villa, completed a 3-1 aggregate win and are now available at 8/1 as second favourites with Paddy Power
While Ukrainian side Shakhtar Donetsk, who scored late on to earn a 1-1 at White Hart Lane and win the tie 3-1 overall, are 16/1 to win the trophy with the same betting firm.
