City had to win on Sunday against 11th-placed United at AAMI Park to reach the finals for a 10th consecutive season, as they were two points behind the Wanderers with one less win to their name.
The Wanderers kept their season alive with a dramatic 4-3 win over third-placed Victory on Saturday night.
But Jamie Maclaren tapped home in the 19th minute to snuff out Western Sydney's finals hopes, with City finishing sixth on 39 points, ahead of the Wanderers (37).
City's win sets up a tantalising derby clash next week with fierce rivals Victory.
United created plenty of chances despite City dominating possession.
Lachie Wales hit a shot into the side netting in the third minute, and Michael Ruhs thought he had opened the scoring in the 13th minute but was clearly offside.
City took the lead when Marin Jakolis flicked on Tolgay Arslan's corner and Maclaren snuck in to tap home at the back post.
Western immediately appealed for offside, but their pleas fell on deaf ears.
United should have hit back when Ruhs slipped through Wales in the 33rd minute, but he shot straight at Jamie Young.
Barely two minutes later, a wide-open Wales at the back post picked out Young again, this time with a free header.
Wales forced a good save from Young in the 49th minute and Matt Grimaldi poked the rebound straight at the goalkeeper.
Ruhs was forced off in the 52nd minute with an apparent groin injury.
Maclaren should have doubled City's lead in the 68th minute but shot tamely at Tom Heward-Belle from close range.
Two minutes later, Young pulled off a top-drawer save to deny Riku Danzaki an equaliser.
Abel Walatee thought he'd equalised in the 75th minute with a ripping finish, but he was immediately ruled offside.
It made for a chaotic final period of the game, with City hanging on for dear life.
Seb Pasquali dragged a long-range effort wide in the 88th minute and City held their nerve from there.
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