Substitute striker Shane Smeltz broke the Wanderers' hearts with a winning goal in the 90th minute to settle a niggly affair that lived up to the hype as one of the city's main sporting events.
The Wanderers were clearly the better team and after conceding a first-half goal to defender Jacques Faty they come back strongly to equalise through Dario Vidosic and looked the team more likely to win until Smeltz came up with the shot that silenced most of the Pirtek Stadium crowd.
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Both Sydney goals came completely against the run of play via set pieces.
It is not the first time that the Wanderers played better than Sydney and ended up losing.
The Wanderers have not beaten Sydney in six matches and this has left Popovic perplexed and wondering how to stop the rot.
"I don't know, you tell me," a visibly distraught Popovic said, when asked if Sydney were becoming the Wanderers' bogey team.
"Results are results and we lost. So maybe they are our bogey team, that's what it is. I don't know."
Arnold was basking in the glory of a vital win that took the Sky Blues to joint second spot on the ladder with the Wanderers, a point from leaders Brisbane Roar.
He refuted a suggestion that Sydney had the wood on the Wanderers and he gave credit to their performance but still managed a subtle dig at the Sky Blues' crosstown rivals.
"I don't think we are their bogey team," Arnold said.
"A derby is always a different game but maybe it (Sydney's record) is playing on their minds.
"I read a few comments from their players during the week about not winning a derby for a long while.
"Most of them have never won a derby. Only Nikolai Topor-Stanley and Mark Bridge know what it's like."
Arnold, 52, and Popovic, 42, are Sydneysiders through and through.
They have been very good friends ever since they played together for Sydney United and later for Sanfrecce Hiroshima in the J.League.
Confident Arnold comes across as the senior partner in the relationship with his "little brother" ever since Popovic started coaching in the A-League in 2012-2103.
Arnold has a strong head-to-head record against Popovic and he led Central Coast Mariners to a grand final victory over the Wanderers in 2013.
When Arnie and Poppa faced the media in a joint press conference the day before the finale at Allianz Stadium, Arnold was very much in control of proceedings.
"He was a cheeky little thing, he still is," he said, recalling the days when they lived in each other's pockets in Japan.
It was vintage Arnold, showering the novice Popovic with praise for his early success as a coach but at the same time he was cocky enough to let everyone in the room know, by his body language, who was the elder statesman.
Arnold is a far more experienced coach than Popovic and this may have something to do with a number of tactical victories over the Wanderers' boss.
And none will have tasted sweeter than Saturday night's because the Wanderers went into the contest at what Arnold calls the "little shed" in Parramatta as favourites.
Arnold knew exactly how to nullify the Wanderers' threat: by depriving the home team of space up front and keeping danger men Mitch Nichols, Romeo Castelen and Mark Bridge quiet.
Popovic's players were unable to disentangle themselves from Sydney's stifling tactics and paid the price for missing the few decent chances that came their way.
The Wanderers did not have a plan B with which to unlock Sydney's defence and this was mainly due to Arnold's tactics.
Or perhaps because Arnold's mind games are beginning to unnerve Popovic and his Wanderers team.
