City's annual report published on Wednesday revealed a loss of 23 million pounds ($36.1 million) in 2013-14, substantially down on the 51.6 million deficit of the previous year even though the figures include the paying off of the 16.2 million FFP punishment imposed by UEFA, a penalty the club disputes.
The report also announced turnover had broken the 300 million-pound barrier for the first time since owner Sheikh Mansour acquired City in 2008, reaching a record figure of 347 million pounds in income generated.
City chairman Khaldoon Al Mubarak was delighted.
"The club is where we hoped it would be when we began this transformation six years ago," he said.
"Now we have moved beyond the period of heavy investment that was required to make the club competitive again, it is commercial growth of the kind we are seeing today that will underpin and support our operations in the future."
UEFA hit City in May with a fine of 49 million pounds, all but 16.2 million of which was suspended, for breaching FFP rules, ensuring the club had to stick to new conditions in order to avoid paying a heavier fine in future.
Chief executive Ferran Soriano, though, was confident a corner had been turned.
"This year Manchester City has reached a new level of financial sustainability," he said.
"We have budgeted for a profit in 2014-15 and now expect to be entering the 2015-16 season with no outstanding sanctions or restrictions."
($1 = 0.6376 British Pounds)
(Writing by Ian Chadband, editing by Ed Osmond)
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