Pep Guardiola’s side were undone by Manchester United’s quickfire first half double, with Marcus Rashford converting a penalty six minutes before Anthony Martial scored to render Nicolas Otamendi’s late header meaningless.
City enjoyed the lion’s share of possession and created several chances at the Etihad Stadium, where United were menacing on the counter-attack and Walker believes the players have to be honest about their standards at both ends of the pitch.
"Us as defenders need to hold our hands up,” he said.
“We need to keep clean sheets and strikers maybe need to put more away. They had a game plan and it worked.
“They have quick players in quick areas and they are going to hurt you on the counter. Credit where credit is due, they stepped up today. Fair play.”
The loss leaves City in third place and 14 points behind Premier League leaders Liverpool.
Walker conceded retaining the title is becoming increasingly difficult for the defending champions, as he admitted the players have found themselves in an unfamiliar situation.
The 29-year-old says the onus is squarely on he and his team-mates shoulders, however, as he promised to fight until the championship becomes mathematically impossible.
“The first year I came here, we kept clean sheet after clean sheet, scoring a lot of goals,” he added.
“This year, it’s a little different. We have to take a look at ourselves. Mainly the players. You can’t fault the manger. He’s won numerous trophies. I can't put my finger on it.
“It is going to be difficult, Liverpool are on fire. They are getting wins and we are not. It is a big gap, but we will fight until the end."