The club, bankrolled by Sheikh Mansour Bin Zayed Al Nahyan, a member of Abu Dhabi's ruling family, had racked up a deficit of 197.5 million pounds the previous year, the highest recorded in British soccer.
Despite remaining deep in the red, City said they were well placed to meet new financial fair play rules being introduced by UEFA to force clubs to clean up their balance sheets or risk exclusion from European competition.
The club noted that some of their spending and investment last season would be covered by exemptions under the rules being brought in by European football's governing body.
Chief executive Ferran Soriano said the priority for City was success on the field which would drive commercial growth and provide more money to spend on the team.
"This cycle will be key in achieving the long-held ambition for sustainability at Manchester City," he said in a statement.
Soriano is confident City's plans to build an academy for young players adjacent to their Etihad Stadium will help the club prosper.
"It is my belief this project and the long-term perspective of our owner will further differentiate the club from its competitors in the future," he added.
Record revenue of 231 million pounds, an increase of more than 50 percent, helped City to rein in their losses in a season when they pipped local rivals Manchester United to the Premier League title.
The value of a new 10-year sponsorship agreement with Etihad Airways, the national airline of Abu Dhabi, was illustrated by a doubling of commercial revenue to 97 million pounds.
However, City's annual revenue fell short of the 320 million pounds generated by United last season.
The club said they invested heavily to buy players and create a winning team after Sheikh Mansour took over in 2008 and that recruitment spending had now passed its peak.
However City, whose players include Argentina's Carlos Tevez and Yaya Toure of the Ivory Coast, spent more than 200 million pounds on wages and related staff costs last season.
The club have already been eliminated from the lucrative Champions League this season and are second in the Premier League, six points behind United after a 3-2 defeat in the Manchester derby last weekend.
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