The result puts City into third place and a top-four finish will be secured if they take four points from remaining games against West Brom and Watford.
City, who surprisingly left top scorer Sergio Aguero on the bench, were not clinical enough in front of goal and Leicester became increasingly unsafe in the second half.Craig Shakespeare's side looked set to equalise when Gael Clichy tripped Mahrez in the area and referee Robert Madley had no hesitation in pointing to the penalty spot. I like that, but since the first time I arrived here, and hopefully I will stay here a long time, the team is going to play the way I want to play.
'You would have argued that the goalkeeper wouldn't have stood there, that's an unnatural position for a keeper to take up, if Sterling wasn't there'.
At first glance, it seemed damned harsh as Mahrez slipped but still watched his spot kick loop into the net but the referee enforced the law to the letter and he was probably right to disallow it - even if everyone wasn't too pleased with the decision (especially Leicester fans).
City, who have 72 points to Liverpool's 70 and Arsenal's 69, have their destiny firmly in their own hands although there were nerves aplenty against Leicester. But the two early goals settled City here while the defense coped better with the unsafe Jamie Vardy up front.
Guardiola admits that Leicester were hard opponents but also adds that it was the right decision to have ruled out Riyad Mahrez's penalty "goal" which would have put scores at 2-2. However, a clumsy challenge from Yohan Benalouane saw Sane fall to the floor and referee Bobby Madley point to the spot.
Goals from David Silva and that Jesus penalty gave City the win, with Toure playing a key role.
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However, he felt that City's first goal should not have stood, with Raheem Sterling swinging a leg at Silva's goal-bound shot, and missing it, while standing in an offside position.
Since he has already touched the ball with one foot and has touched it again with the other before any other player on the pitch could, the penalty is liable to be ruled out. "He is blocking my view, he goes for the ball".
Yaya Toure, Gael Clichy, Bacary Sagna, Willy Caballero and Jesus Navas are also out of contract at the end of the season.
City had been non-existent as an attacking force, with Riyad Mahrez spending more time on his backside than on his feet, but then he did well to play a ball out to Marc Albrighton, who whipped in a superb cross for Okazaki to convert with a stunning volley.
The Foxes battled back in the second-half of an entertaining match at the Etihad Stadium to make the score 2-1 and when Mahrez was awarded a penalty on the 77th minute, he stepped up to take the kick.
Mahrez couldn't capitalize and with some desperate late defending, City clung on. "We got the luck we needed throughout the season", Sterling told Sky Sports.
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