Both teams hit the woodwork in a lively start to the Group D clash at a sold-out Joie Stadium in Manchester, with City grabbing the lead when defender Naomi Layzell bravely scrambled home.
Vivianne Miedema headed smartly back across goal from a corner and a lunging Layzell reacted quickest to prod the ball past a crowd of Barcelona players.
Last year's Ballon d'Or winner Aitana Bonmati went close to an equaliser with a deflected effort, but Khadija Shaw grabbed a second for City to condemn Barcelona to a rare defeat.
Shaw beat the offside trap with a perfectly-timed run to latch onto Layzell's pass and rounded goalkeeper Cata Coll to clinch a memorable win.
"It's fantastic from Naomi and Bunny (Shaw) finishes it off. It gave the players a real lift and we have to remember who we're playing against. It's a step for us," City manager Gareth Taylor told DAZN.
"I said in my press conference yesterday that I admire Barcelona and what they've done and we try to replicate that."
City are making their first group stage appearance, having last played in the Champions League proper in 2020-21 when Barcelona knocked them out in the quarter-finals.
The defeat is only Barcelona's second in 19 games in the group stage since its introduction for the 2021-22 season. It is also the first time they have failed to score a goal.
Pernille Harder scored a second-half hat-trick as Bayern kicked off their Group C campaign with a convincing victory over Arsenal in Germany.
Arsenal led through Mariona Caldentey's strike in Germany, but Bayern captain Glodis Viggosdottir brought the home side level before Sydney Lohmann put them ahead.
Laia Codina equalised for Arsenal midway through the second half only for Harder to find the net three times in the final 20 minutes to secure an impressive win for German champions Bayern.
"The last few years have been tough with injuries, so now I'm just happy to be back playing in the Champions League. I was happy with the goals and the win," said Harder, who ended a two-year goal drought in the competition.
Juventus are level with Bayern on three points following a 1-0 win away to Norway's Valerenga, with Sofia Cantore netting the only goal.
Swedish side Hammarby won their first ever group stage game 2-0 against Austrian champions St Poelten, who are appearing in the group phase for the third season in a row.
Vilde Hasund's long-range effort gave Hammarby the lead and Cathinka Tandberg followed up her late winner in qualifying by wrapping up the points with another goal two minutes from time.
