The German outfit finished second in what looked to be a daunting Group B, containing 13-time winners Real Madrid, Italian Serie A leaders Inter Milan and Ukrainian side Shakhtar Donetsk to reach the knockout stages.
And Guardiola, who previously managed in the Bundesliga with Bayern Munich, knows Marco Rose’s side will push City to their limits in Budapest for a place in the quarter-finals.
“I respect German teams in the competition because I know how strong they are,” the City boss said of Monchengladbach in his pre-match press conference ahead of Wednesday evening's tie.
“German teams are always so dangerous when the game is open. They arrive with a lot of players in the box.
"We have to be focused, they are in the Champions League. They make good buildup, short passes and are attractive. They are fast and make good transitions.
“In the last 16 all the teams deserve respect and hopefully we can get respect too.”
City go into the game off the back of an incredible 18-game winning run in all competitions, and Guardiola has called for his players to transfer that form onto a European setting once again.
But he did concede that taking on Monchengladbach will be a slight step into the unknown, and that they will have to adapt to the new challenge.
Our boss remarked: “We have to be focused for 90 minutes like we do in the Premier League.
"The only difference is the players don't know Monchengladbach players that well, so we have to introduce them, we need to know them a little better.
“(But) we prepare like we have in the last months.”
Hear Pep Guardiola's thoughts in full ahead of our Champions League tie by watching the video above...