1980–98: Fourth Division championship and first play-off success
York's league positions since 1929–30
The started comfortably for York City, and the team were 14th in the table by mid January 1981. However, three wins from the last 18 matches saw them finish in bottom place. York's seventh application for was successful with 46 votes. Poor form at home contributed to York occupying the bottom half of the table for most of , with a club record of 12 successive home matches without a win set. was dismissed as manager in December 1981, and the club dropped into the bottom four under the caretaker management of Kevin Randall. Former York player and club director Barry Swallow took over as caretaker manager in March 1982, and several convincing home wins toward the end of the season helped the team to 17th place. , who had played on loan from Stoke City the previous season, was appointed player-manager in May 1982, with Viv Busby as his assistant player-coach. York finished in seventh place; their inconsistent away form in the last half of the season led to them missing out on promotion. The club occupied one of the top two places in 1983–84 from the second week of the season onwards, and won the championship with 101 points. They became the first team to achieve a three-figure points total in a season. The Yorkshire Evening Press billed them the "Team of the Century". York set new club records for most wins (31), most away wins (13) and most goals (91). For the first time since , York had two players score over 20 league goals in a season; these were and Keith Walwyn. A profit of almost £15,000 was posted and the club aspired to further progress and promotion.
Winning six of their first eight matches in , York were top of the by early October 1984. After a run of two wins from 11 matches, they slipped to 11th place in mid December 1984, though they continued to occupy a top half position before finishing the season in eighth place. In January 1985, York beat team Arsenal 1–0 at home in the FA Cup fourth round, courtesy of a late scored by Keith Houchen. They reached the fifth round for the third time and drew 1–1 at home to European Cup holders Liverpool. They lost 7–0 in the replay at Anfield—the club's record cup defeat. York started well and were second in the table by late November 1985, before a poor midseason spell saw them drop into midtable. After being unbeaten in the last nine matches, they finished seventh in the table, marking the fifth consecutive season in which York's end-of-season league placing improved. They reached the FA Cup fifth round for the second consecutive season, again drawing 1–1 at home to Liverpool, before losing 3–1 after at Anfield. York made a strong start to , and in late September 1986 they were in second place. They won only seven of their remaining 38 matches and needed a point from their last match to avoid the danger of relegation, which they achieved with a 1–1 draw against Notts County. York finished 1986–87 in 20th place.
Smith left to take over at Sunderland in May 1987, and former Blackburn Rovers manager Bobby Saxton was appointed in June. Only two players were under contract at the time of Saxton's arrival; his hastily arranged squad struggled from the start of , and only won their first match in late October 1987. York were bottom of the table for most of the season, and were relegated after finishing in 23rd place. The season was statistically the club's worst in the Football League, with the fewest wins (eight), most defeats (29) and the fewest points since the three points for a win system was introduced (33). York made a poor start to , and Saxton resigned with the club bottom of the Fourth Division in mid September 1988. Swallow took over on a caretaker basis before the former Hartlepool United manager was appointed in October 1988. York's away form improved in the second half of the season, and in the last week they had a slim chance of reaching the play-offs. They missed out on a play-off place and finished the season in 11th place. A record loss of £190,000 was posted for the season, but the club carried no overdraft because of interest-free loans from directors and a £100,000 share issue. York started strongly and were in third place by mid December 1989. Successive home defeats in late December 1989 marked the start of a decline that saw them finish the season 13th in the table.
In September 1990, York player David Longhurst collapsed and died after suffering heart failure during a home match against Lincoln City. A few months later, a newly built, covered stand at the Shipton Street End of Bootham Crescent was named after him. York were the Fourth Division's second lowest scorers in , as they finished 21st in the table. Douglas Craig, who had been on the board since 1978, succeeded Michael Sinclair as chairman in June 1991. York had won two of 11 matches by mid October 1991; Bird was dismissed and was replaced in November by Aston Villa assistant manager . York continued to be placed in lower midtable, and finished fourth from bottom for the second year running in . They started 1992–93 with a club-record start of four wins, and led the table until late December 1992. Ward left for Bristol Rovers in March 1993, shortly after a midseason slump in which York won only one of 13 matches. Ward's assistant took over and York finished the season in fourth place. They played Bury in the play-off semi-final, drawing the first leg 0–0 at Gigg Lane before winning the second leg 1–0 at home with a goal from Gary Swann. In the at Wembley Stadium, York beat Crewe Alexandra 5–3 on , after the score had finished 1–1 after extra time. scored the decisive penalty as York won promotion to the third tier, now named the after the formation of the Premier League in 1992.
York made a good start to , before a series of poor results saw them slip to 17th place in late November 1993. They only lost five of their last 30 fixtures to finish the season fifth in the Second Division table—their highest league placing since 1976. They lost to Stockport County in the play-off semi-final, being beaten 1–0 in the second leg at Edgeley Park after drawing 0–0 at home in the first leg. York were in lower midtable for the first half of , but improving form saw them move up the table, before finishing in ninth place. They struggled through most of , and only avoided relegation by winning their last match away to Brighton & Hove Albion; they finished in 20th place. This season saw York record a 4–3 aggregate victory over Manchester United in the League Cup second round. York defeated a strong United team including some younger players 3–0 at Old Trafford in the first leg; in the second leg, United fielded some more experienced players, and despite losing 3–1, York progressed on aggregate. United went on to win the Premier League and FA Cup double. York finished 20th in 1996–97, only securing safety in the penultimate match with an away win over Rotherham United. For the second consecutive season, they eliminated Premier League opponents from the League Cup in the second round, with a 4–3 aggregate win over Everton. After drawing the first leg 1–1 at Goodison Park, York progressed after winning the second leg 3–2 at home. In mid December 1997, York were fourth in the table, but declining form after New Year saw them finish 1997–98 in 16th place.