Leading 4-0 from the first leg, City extended their lead thanks to Gabriel Jesus' early goal. But Basel showed great spirit to fight back and after Mohamed Elyounoussi had levelled, Michael Lang struck a second-half winner to give the Swiss side a famous, albeit meaningless, 2-1 victory.
Guardiola was pleased to see City into the last eight for the first time during his tenure, but admitted that their performance on the night had not been good enough.
36 - Manchester City's defeat to FC Basel ended a 36-game unbeaten run at the Etihad Stadium in all competitions (W29 D7) & was their first defeat on home soil since the December 3rd 2016 (1-3 v Chelsea in the Premier League). Brushed.— OptaJoe (@OptaJoe) March 7, 2018
"We are happy to be in the quarter finals, we are so happy for that," the Spaniard told CityTV. "Second half we didn't attack and forgot to even pass the ball [...] the second half was really really poor."
Only Ilkay Gundogan and Bernardo Silva retained their places from the first leg as Guardiola made wholesale changes. Among these were a first start of 2018 for the goalscorer Jesus, and a first home start in the Champions League for 17-year-old Englishman Phil Foden.
"It's important Gabriel Jesus played for 90 minutes," Guardiola said. "When you are out for a long time you need to find the rhythm to come back. His goal will give him confidence.
"Phil Foden was good and in the second he was perhaps the only one who tried to be aggressive. It’s good for the rhythm of the future."
"The difference in the quarter finals, in that level all the teams will be so, so tough and demanding," Guardiola added. "We will try to be ready and to come back because we did it in the recent games."