John Anderson headed over with a chance for the second, but the visitors were not laying down and dying and the equaliser looked imminent.
It came 8 minutes before half time, with Stuart Gray getting his name on the scoresheet. Paul Hall's right-wing cross went past the back post beating both Paul Musselwhite and Justin Whittle. Duane Darby, making his return to Boothferry Park, nodded the ball back in and Gray powered the ball between Musselwhite and John Anderson.
Rushden & Diamonds would have been in front at half time had it not been for Ian Ashbee. On the counter attack, Duane Darby beat Carl Regan to go free in front of goal. However, Ashbee made a superb last-ditch tackle to deny the ex-Tiger just as he was lining up his shot.
Ian Ashbee went into the book 11 minutes from time, and will now miss the local derby at Lincoln in a fortnight after picking up five yellow cards.
The City defence couldn't handle Jamaican striker Onandi Lowe when he fired just wide of the post, while substitute Ryan Williams came close to turning in a Carl Regan cross.
But neither team made the breakthrough after an entertaining game of football, and City extend their unbeaten run in the league to three.
City line-up (4-3-3): Musselwhite; Regan, Whittle, Anderson, Delaney; Green, Ashbee, Keates (Burton 80); Jevons (Bradshaw 80), Alexander, Elliott (Williams 55).
Un-used subs: Deeney, Peat.