City cat featured in stories (7)
I believe the answer is:
limoges
'city' is the definition.
(I have seen 'City of porcelain' mean 'limoges' so perhaps 'city' could also mean 'limoges')
'cat featured in stories' is the wordplay.
'cat' becomes 'mog' (informal British term).
'featured in' is an insertion indicator.
'stories' becomes 'lies' (to tell stories can mean to lie).
'mog' inserted within 'lies' is 'LIMOGES'.
(Other definitions for limoges that I've seen before include "French city known for its porcelain" , "French city noted for enamels and porcelain" , "French porcelain centre" , "French commune" , "foreign city" .)