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The former Chelsea midfielder struck either side of half-time, with Jeremy Doku also on target, to give Pep Guardiola’s side their first win in three matches in the Premier League and move to one point behind Liverpool, who beat Crystal Palace earlier on Saturday.
City fell behind midway through the first half when Andreas Pereira volleyed in from close range, but Fulham passed up further chances to add to their lead.
Kovacic’s goals and a clinching third from Doku ultimately made the visitors pay for their wastefulness, although substitute Rodrigo Muniz set up a nervy finish for the champions when he scored with two minutes to play.
City held on to stay second and move on to 17 points while Fulham remain sixth on 11 points ahead of seventh-placed Newcastle United, who play against Everton later in the day.
How the match unfolded
Fulham gave Man City an early warning as Adama Traore was denied by Ederson following a swift counter, and the visitors broke the deadlock after 26 minutes when Raul Jimenez’s clever backheel flick into the six-yard box was volleyed in by Pereira.
Traore squandered a great opportunity to double Fulham’s lead when he fired over from close range, and City took advantage of their reprieve to level in the 32nd minute when a corner broke kindly for Kovacic, whose strike deflected in via Joachim Andersen.
Kovacic completed the turnaround within two minutes of the second half, receiving Bernardo Silva’s pass before sweeping past Bernd Leno.
Fulham refused to lie down, though, and once again Traore raced away, only to be denied by Ederson.
City grabbed what proved to be the vital third goal with eight minutes remaining as Doku cut inside from the left before rifling beyond Leno from the edge of the box, even if Muniz’s subsequent deflected effort ensured a tense conclusion.
City return to winning ways
After back-to-back draws, City knew further dropped points here would allow Liverpool breathing space at the Premier League summit, with the Reds having briefly established a four-point cushion with a 1-0 win at Palace.
And City’s 49-match unbeaten home run in all competitions appeared under threat when Pereira broke the deadlock following a neatly worked Fulham move.
But after Traore missed the target when he should have made it two, the hosts quickly regained control and restored parity before the break, before edging their noses in front soon after the restart.
Kovacic was the unlikely City hero as he took his goal tally for the season to three, already his best return in a single Premier League campaign.
While the margin of victory was not quite so comfortable in the end, Guardiola and his side can at least head into the international break hot on Liverpool’s tails in the title race.
Wasteful Fulham made to pay
Although they gave a hugely positive account of themselves, Fulham will definitely depart the Etihad with a sense of what might have been.
Indeed, but for profligate finishing, the Cottagers could have moved level on points with City after a superb run of form lifted them into the top half of the Premier League table.
Fulham always looked dangerous going forward, fashioning chances worth an Expected Goals (xG) of 2.4, and the breakthrough strike was a stylish one as Jimenez’s clever backheel set up Pereira.
But Traore was particularly wasteful, and after firing over at 1-0, he missed another big chance when the visitors were 2-1 down, sprinting away from substitute Kyle Walker but failing to beat Ederson.
Even with those setbacks, Marco Silva’s side stayed in the match with the late goal from Muniz, but they did not quite have enough to rescue a point and fell to their first defeat since losing at Manchester United on the opening day.
Club reports
Man City report | Fulham report
Match officials
Referee: Peter Bankes. Assistants: Eddie Smart, Nick Greenhalgh. Fourth official: Oliver Langford. VAR: Graham Scott. Assistant VAR: Sian Massey-Ellis.