Third-placed City are a point behind the Reds and have a 100% league record at Etihad Stadium so far this season. Only two points separate the top five.
Second-placed Arsenal are at West Ham, while Chelsea, who are fourth, host Swansea. Everton, in fifth, entertain Sunderland, while Manchester United travel to Hull.
Reigning champions United are eighth, six points off the top four and eight points adrift of Liverpool.
Striker Robin van Persie and midfielder Michael Carrick have respective thigh and Achilles injuries but the Old Trafford club's boss David Moyes hinted the pair could be back soon.
"This is the time when miracles happen," said the Scot. "Let us hope there is one for Robin van Persie and Michael Carrick."
All 20 Premier League teams will be playing on Boxing Day. The game at Hull gets proceedings under way at 12:45 GMT, while the match between City and Liverpool at 17:30 GMT concludes the action.
City have won all eight league games at home and scored 35 goals in the process, including six against both Tottenham and Arsenal and four in the Manchester derby.
But the Reds have the Premier League's top scorer, Luis Suarez, in their ranks. The Uruguayan, who missed the start of the season because of suspension, has 19 goals from 12 games so far.
Liverpool boss Brendan Rodgers played down his side's title chances after a win over Cardiff and thinks Manchester City are the favourites
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