The Premier League leaders were gifted an opener in the 15th minute when Leander Dendoncker redirected a Riyad Mahrez cross into the net for a Wolves own goal.
Wolves responded well after the early mistake and were able to go into half-time down one after a late Aymeric Laporte goal was waved off for a narrow offside call just before the break.
Man City dominated the opening minutes of the second half, but Wolves shockingly drew level just past the hour mark when Conor Coady headed home from a Joao Moutinho free kick to make it 1-1.
Wolves stood tall against unrelenting pressure from the hosts, but Man City managed to retake the lead as the second half wore on through Gabriel Jesus, who pounced on a loose ball and buried a close-range shot.
Mahrez, who had a sensational 90 minutes, added further gloss to the scoreline with a finish from the top of the area following a poor giveaway by Wolves substitute Owen Otasowie and Jesus scored his second to secure the three points beyond a shadow of a doubt for Pep Guardiola’s side.
Despite extending the club’s record run of wins, Guardiola was in no mood to talk about the title being in the bag.
“Manchester United. That’s all we care [about now],” Guardiola said.
“The champions are Liverpool, the crown belongs to them. We are in the best position right now to take them out and we are going to try but they are the champions.
“There are 33 points to play for.”
The result puts City 15 points ahead of second-place Manchester United as they seek to take the Premier League champion’s title back from Liverpool.
Over the course of their 21-game winning streak, Man City have outscored their opponents by a staggering 55 goals to just eight allowed.