Though the champions created a host of opportunities, Liverpool proved more clinical in front of goal, scoring twice inside the first 15 minutes to take an early stranglehold on the game.
And although Bernardo Silva’s second half strike saw City mount sustained pressure on the Liverpool goal in the last 10 minutes, we were ultimately left frustrated.
The result left the champions nine points behind Liverpool and a point adrift of second placed Leicester and Chelsea.
But the City boss said he was ‘proud’ of the way his side performed and insisted there would be many more twists and turns in the title race.
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“Always be positive and never give up, that's why we won back to back titles,” Guardiola declared.
“We want to fight until the end. We dropped points for our faults. For other things we cannot control.
“There is still seven months to go. If Liverpool win title, I will be the first to congratulate them for how good they are.
“We are going to try and in football, you can't always win,
"I’m so proud to see my team play in this stadium against that team that way.
“What happened today we showed why we were the champions
"In this stadium, to play way we played we did incredible... I'm so proud of my team.
“(We faced the) strongest team in Europe and the way we played, we played so good."
City could point to two incidents where the ball appeared to strike Trent Alexander-Arnold’s arm in the box only for penalty appeals to be waved away by referee Michael Olivier and VAR.
The Blues also paid the price for a lack of cutting edge in front of goal, spurning a number of excellent opportunities.
But Guardiola insisted he preferred to concentrate on his team’s overall performance
“I want to talk about our performance - it was so good,” Guardiola added.
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“For the performance we had, it was awesome. One of the best.
“In the boxes, it was similar to the Champions League quarter-final (in 2018). Three shots on target, the first three goals.
“We lost because they scored three goals and we scored one
“In football, you can't always win,
“I’m so proud to see my team play in this stadium against that team that way.”