Manchester City s Spanish manager Pep Guardiola gestures on the touchline during the English Premier League football match between Manchester City and Crystal Palace at the Etihad Stadium in Manchester, north west England, on October 30, 2021. (Photo: AFP)
City trailed to Wilfried Zaha's early opener before losing defender Aymeric Laporte to a red card for hauling down the Ivorian as he threatened to break clear.
Gabriel Jesus had an equaliser for the 10 men ruled out for offside after a VAR review in the second period before Conor Gallagher secured a famous win for the Eagles with two minutes remaining.
City are now five points behind Premier League leaders Chelsea and face Manchester United in a derby at Old Trafford next weekend.
"When you play 50 minutes 10 against 11, it is difficult for a team like us because you need the process and to do everything right," said Guardiola.
"The players showed character and tried, but unfortunately many, many things went wrong and we lost the game."
City players were furious with the officiating as on top of Laporte's dubious dismissal and the disallowed goal, Phil Foden saw a penalty appeal waved away in the second half.
But Guardiola refused to blame the referee as his 200th Premier League game in charge ended in defeat.
"It could be a yellow or red," he added on the Laporte incident.
"It depends on the referee and what he thinks. The goal, I imagine the linesman says he's offside. We didn't lose because of that."
Victory was just Palace's second since Patrick Vieira took charge as they moved five points clear of the relegation zone.
"We worked hard and when you come to a place like City and you don't concede a goal and you take your chances that's really good," said Vieira.
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