Foden's clinical finish just before halftime on a sodden night at the Etihad Stadium proved enough for City to claim a fourth successive league win, but it was far from comfortable.
City had chances in the second half to stretch their lead with keeper Robert Sanchez and the woodwork coming to Brighton's rescue but the visitors finished strongly.
The hosts could have eased the tension in stoppage time but substitute Raheem Sterling lashed a penalty over the crossbar.
Brighton's winless league run now extends to nine and they are perched one place above the relegation zone.
After a slow start to the season Pep Guardiola's side initially made steady progress up the table but are now accelerating and are in the thick of the title race.
"It definitely feels like we're back to our best. We've taken confidence from the last few results," Foden, who has scored four goals in his last six games, said.
"We could have done better today but overall I'm very proud of the team. It's a great result."
Foden is now City's leading scorer this season with eight goals in all competitions and when he was finally replaced late on by Sterling he walked off having made another emphatic statement to Guardiola and England manager Gareth Southgate.
"Phil Foden is 20 years old, look at the starts. The amount of games, the assists compared to the bigger stars in football," Guardiola said of the forward. "He can play both sides, in the middle as a false nine. He is so, so clever in front of goal.
"That is why he deserves to play. Today he is playing good. Maybe one day he will rest but right now he deserves it."
At times on Wednesday they were at their slick best with Kevin De Bruyne once again pulling the strings.
The Belgian teed up Riyad Mahrez for a far-post volley but Mahrez failed to make proper contact and he forced a great save by keeper Sanchez after a lightning break.
Brighton, tidy in possession and solid at the back, were close to reaching the interval on level terms but were undone by a superb City goal.
De Bruyne slipped a pass to Foden whose first touch left two defenders for dead before the England international dispatched a slide rule low shot inside the post and beyond the dive of Sanchez.
City turned the screws after the break and Mahrez again wasted a good opportunity, shooting wide after going clear.
Surprisingly, City lost their grip of the game in the final 20 minutes and Brighton sensed an opportunity.
Alex Mac Allister curled one effort just wide and Bernardo's low ball across the area was agonisingly just out of reach of the sliding Davy Propper.
When Sanchez fouled De Bruyne it gave Sterling the opportunity to boost his meagre tally of four league goals this season but his kick cleared the bar.
There was a degree of relief for City at the final whistle but with seven successive wins in all competitions and comfortable fixtures ahead, they are looking ominous.