City were stopped by two quick goals from Mario Gomez just before half-time and the result sees them slip to third in Group A with only a single point from two games played.
Speaking to Sky Sports after the game, the Italian was understandably disappointed to see his side defeated in Bavaria.
“We played very well for 30 minutes after we conceded first goal and we should have paid more attention but when we let in the second, the game was over there.”
City started the game well and seemed equal to the challenge of the German side and could have had a penalty within the first five minutes when former defender Jerome Boateng failed to get the ball in a challenge with David Silva.
Another penalty shout fell on deaf ears when Micah Richards was brought down in the box by Boateng but the Hungarian officials gave neither and Mancini appeared to give the referee the benefit of any doubt.
“Yes, for me there were two pens, the ref probably didn’t see them,” he added.
With City welcoming Spanish side Villarreal to Etihad Stadium next, Mancini is confident that progression to the next phase is not out of reach just yet and is relishing the chance to gain revenge against the German side.
“Bayern were too strong tonight, but we have four more games and I think we can beat them when we meet again in Manchester.”