The Citizens entered the dead-rubber fixture having already qualified for the last 16 as group winners, and manager Pep Guardiola decided to make nine changes to his starting lineup.
The notable inclusion in the first XI was academy graduate Micah Hamilton, who was handed his senior debut and marked the special occasion by scoring the opening goal in the 19th minute, firing a powerful strike from a tight angle over Red Star goalkeeper Omri Glazer.
On a memorable night for City's academy, man-of-the-match Oscar Bobb doubled the visitors' advantage with his first senior goal just after the hour mark, driving at the Red Star backline before curling a left-footed shot into the bottom corner.
Hwang In-beom pulled one back for Red Star before Hamilton earned City a penalty in the 84th minute, allowing Kalvin Phillips - making a rare first-team appearance amid uncertainty about his future - to step up and slot home his first goal for the club to increase the visitors' lead.
Red Star scored again in stoppage time when Aleksandar Katai thumped a close-range header past Stefan Ortega, but City held on to preserve their 100% record in Group G, becoming just the second English club after Liverpool (2021-22) to win all six group-stage games in a single Champions League campaign.
The 3-2 victory also helped Man City become the first English club in European Cup/Champions League history to win eight successive matches in the competition.
Premier League rivals Liverpool notched up seven wins in a row between September 2021 and February 2022, while Manchester United (1966), Leeds United (1970) and Arsenal (2005) have all previously racked up six victories in succession.
Speaking to TNT Sports about his maiden goal for Man City, Bobb said: "What a feeling. In front of our great fans and it was a pleasure. It was a very good atmosphere in the stadium.
"[It was] hostile, but we knew what we wanted to do as a team and in the end we got there.
"If I remember right, I think Rico [Lewis] intercepts, gets forward and gives me the ball. He makes a run [which] drags the defender with him. [I] cut outside and inside and just get it in the far corner. [I felt] relief, happiness, everything."
Guardiola has also heaped praise on Hamilton following his memorable debut, and the Citizens boss will now turn his attention to Saturday's Premier League clash with Crystal Palace at the Etihad Stadium.