Khadija Shaw had given City the lead in the 66th minute, but Terland struck with just a minute of normal time remaining to rescue a point for the hosts.
United started the brighter of the two sides, enjoying more possession in the opening minutes. Terland registered an early effort on target, but her shot was comfortably gathered by City goalkeeper Ayaka Yamashita.
City gradually grew into the contest, with Aoba Fujino and Lauren Hemp looking lively in attack. Fujino fired a powerful effort wide from outside the box in the 12th minute.
United captain Maya Le Tissier led a well-organised defence that kept Shaw quiet for much of the first half.
Ella Toone came close to breaking the deadlock on the half-hour mark, but her effort from inside the box was saved by Yamashita.
Both teams remained compact and evenly matched, with neither able to find a breakthrough before the interval.
United returned for the second half looking more confident in possession, with Hinata Miyazawa playing an important role in midfield.
Jessica Park nearly gave the hosts the lead on the hour mark when she unleashed a thunderous strike from outside the box, narrowly clearing the crossbar.
Three minutes later, United goalkeeper Phallon Tullis-Joyce produced an important save to deny Shaw at the near post.
However, the City striker was not to be denied for long.
In the 66th minute, Shaw received the ball inside the penalty area, turned her marker and fired past Tullis-Joyce to put the visitors ahead.
Despite being booed whenever she touched the ball, Shaw remained unfazed and delivered when her team needed her.
United pushed forward in search of an equaliser, while City continued to threaten on the counterattack.
Fujino forced another save from Tullis-Joyce in the 82nd minute, before Le Tissier made a crucial clearance inside the six-yard box four minutes later to prevent City from doubling their lead.
That clearance proved vital.
With just a minute of normal time remaining, City's defence failed to clear the ball with a header, and Terland reacted quickly to fire home the equaliser.
The goal sparked wild celebrations among the United supporters, with fireworks lighting up the sky and a deafening roar sweeping through the stadium.
Five minutes of added time followed, but neither side could find a winner.
United's late fightback ensured the points were shared in a closely fought Manchester derby.
Goals: Khadija Shaw (66') — Man City; Elisabeth Terland (89') — Man United.
Yellow cards: Mary Fowler (29'), Lauren Hemp (45+1') — Man City; Anna Sandberg (74'), Maya Le Tissier (83') — Man United.
