City's best chance came in the 10th minute, as goalkeeper Tom Evans and midfielder Alex Calvo-Garcia both went to clear the same ball, and Mark Greaves' lob bounced off the top of the bar.
David Beresford made an opening after cutting inside from the right wing, but the shot didn't have enough power to beat Evans.
Early in the second half Musselwhite nearly gifted the visitors a goal. He completely mis-kicked his clearance, but managed to block Steve Torpey's shot.
Matt Wicks had to go off just short of the hour mark after a succesion of knocks forced him out. Ian Goodison came on to make his first appearance in two months.
A minute later Justin Whittle was booked for a foul on the edge of the area. Musselwhite saved Dawson's free kick, and then Lawrie Dudfield wasted a chance on the counter attack, putting a timid shot wide.
David Norris was introduced as Lee Philpott was struggling, but he failed to make an impact. Billy Russell made his last substitution 10 minutes from time with Rodney Rowe coming on for the unimpressive Lawrie Dudfield up front.
Scunthorpe continued to have the better of the chances, winning lots of free kicks around the City area.
The last of them came in the 90th minute, when Lee Hodges fell over Richard Sneekes' leg. With Paul Musselwhite organising his wall, Mark Jackson hit it quickly, leaving the Tigers keeper grasping at it as he dived at full stretch.
City nearly got a quick equaliser when Rodney Rowe chased after a ball over the top. Evans just got his fingertips to it as the ball was turned round the post.
That was the last chance of the game and City will feel cheated after losing out to such a dubious goal.
City line-up (4-4-2): Musselwhite; Edwards, Whittle, Greaves, Wicks (Goodison); Beresford, Johnsson, Sneekes, Philpott (Norris); Alexander, Dudfield (Rowe).
Un-used subs: Glennon, Whitmore.