The loss ended City's perfect start to the Premier League season and left Chelsea, a 3-0 winner in its London derby against Tottenham, the lone unbeaten and untied team. The Blues lead second-place Man United by three points.
Owen's winner came after Rio Ferdinand's blunder allowed Craig Bellamy to equalize in the 90th minute -- the third time City had come back from a goal down.
"We made three horrendous mistakes, mistakes you don't even half associate with our team and it kept them in the game," Ferguson said. "I am unhappy because it spoiled what could have been a really emphatic victory. We could have won by six or seven today. It's probably the greatest derby game ever."
A goal by Wayne Rooney in the second minute and later two Darren Fletcher headers put United ahead, but each time City replied, with a goal from Gareth Barry and two Bellamy goals.
Goalie Ben Foster was to blame on Berry's first equalizer, allowing Carlos Tevez, returning to Old Trafford following his offseason move from United, to set up Barry. Tevez also set up Bellamy for the second goal.
Ryan Giggs set up the late winner for Owen, who had come on the 78th minute.
"It's one of those few moments in my career that I'll look back on and see it as one of the highlights," Owen said. "To score in a derby is great, but for it to be as dramatic as that, you'd have to see it to believe it. It was such an entertaining game and it must be one of the best televised games of all time."
Ferguson praised Owen, who arrived from Newcastle in the summer with something to prove.
"Michael was only on for something like 17 minutes," Ferguson said. "He was the best man to be on there when the game is going to be in their penalty box. There is no one better at taking chances. His positional play, first touch and finish were absolutely superb. World class."
City was playing without suspended top scorer Emmanuel Adebayor and injured Brazilian star Robinho.
Hughes was upset that referee Martin Atkinson allowed the game to go on so long after the fourth official signaled four minutes of added time.
"The fourth official [Alan Wiley] tried to give me an explanation but it didn't sit comfortably," said Hughes. "He said he [Atkinson] had added a minute-plus because of our goal celebration [after Bellamy had made it 3-3] but they got it wrong. We feel robbed."
Sept. 20 in Manchester
Manchester United 4 Manchester City 3. Goals: Rooney 2, Fletcher 49, 81, Owen 90; Barry 16, Bellamy 52, 90.
Manchester United - Foster, O'Shea, Ferdinand, Vidic, Evra, Anderson (Carrick 90), Fletcher, Giggs, Park (Valencia 62), Rooney, Berbatov (Owen 77)
Manchester City - Given, Richards, Lescott, Toure, Bridge, De Jong (Petrov 83), Ireland, Barry, Wright-Phillips, Bellamy, Tevez.