The Barclays Premier League champions now face a huge task to reach the knockout stages for the first time after slumping to a disappointing 3-1 loss to Ajax in Amsterdam.
The result leaves them bottom of Group D with just one point halfway through the programme.
With a testing visit from Real Madrid and a tricky trip to Borussia Dortmund to come - as well as an Ajax rematch in a fortnight - City's challenge could end in frustration for a second successive year.
Mancini blamed himself for the loss in the game's immediate aftermath, but that said was down to his preparations and not his tactical changes during the second half.
The Italian said: "If you have spirit you have quality to play Champions League. If not, you can't. This is the problem. It is not important, the tactics. When you play this game you should have good spirit.
"We are a young club for the Champions League. This is the second time that we play. I think we need to work more for the Champions League."
Ajax were considered the weakest of the four domestic champions in the tough-looking group but they looked anything but as they dominated from the outset against City.
The visitors did snatch the lead against the run of play through Samir Nasri in the 22nd minute but the hosts were deservedly level at the break after a powerful Siem de Jong strike.
Niklas Moisander and Christian Eriksen, with aid of a deflection, put the game beyond City in the second half.
Despite his team's collective inexperience in the competition, Mancini accepts they should have performed better.
He said: "At this moment we have three or four good players injured and they are used to playing Champions League every year.
"But this doesn't change anything. We should play better than this. When you lose an important game like this, and the group is only six games, we don't have time to recover in the Champions League. We need to put everything on the pitch.
"Now it is very difficult. We have one point and I think we have a five per cent chance.
"We need to win all the games and I don't know if this is possible if we play like this.
"I am always positive but now it is difficult for the qualification."
Mancini has been criticised for varying his formations during the game, particularly for starting with a four-man defence but switching to three or five and back again.
The role of James Milner, who started as a holding midfielder, also changed but the most remarkable formation alteration saw the game end with a four-pronged - and expensive - attacking line of Carlos Tevez, Mario Balotelli, Edin Dzeko and Sergio Aguero.
The changes failed to provide the spark City needed but the visitors did have some good opportunities with Micah Richards and Dzeko both working goalkeeper Kenneth Vermeer.
Milner told City TV: "We started the second half quite brightly, I thought, but they got the goal from the set-piece and from then it didn't quite happen for us.
"Although the score was 3-1 we had enough chances to score more goals, but we weren't clinical enough.
"We need to make sure there is not pressure on the strikers to score in every game. Goals have got to come from all over the park.
"When you are playing in the Champions League and you get chances you have to take them."
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