European champions Bayern delivered a masterclass as they powered to a convincing victory in Champions League Group D.
The formidable attacking trio of Franck Ribery, Thomas Muller and Arjen Robben all struck as City were completely outplayed on their home turf, although they also contributed to their own downfall.
Errors from goalkeeper Joe Hart and the defence proved costly but the hosts at least finished strongly as Alvaro Negredo replied and Bayern had former City defender Jerome Boateng sent off.
The result lifted Bayern clear at the top of the group and, even after just two games, probably left City in a battle for second place with their next opponents CSKA Moscow.
The overwhelming feeling was that a City side that thrashed Manchester United just 10 days previously were taught a footballing lesson.
And Pellegrini admitted as much, telling Sky Sports: "We played very bad. Bayern Munich played a very good game as always. We learned an important lesson in their goals.
"We didn't have enough time with the ball at our feet.
"I think that we were playing in a different way. They had possession of the ball and I don't think we can make the change to fight that.
"I always think a lot of things before and after the match. It was a possibility, but I thought this was the best way to play.
"I will talk about that with the players in private.
"All the games are very important. This was an important game to see what level we are playing at."
Pellegrini added: "I will talk about the team, not individual players.
"That was not the team we are seeing every Sunday here in the Premier League and that was the worst thing.
"Bayern always had a lot of possession but that was not a good day for us.
"The three goals - I think we can do better, not only the goalkeeper.
"But you can concede goals to Bayern Munich because they are a strong team."
Pellegrini admitted concern over Hart's form but would not go into detail on the issue.
He said: "Of course I am worried about the mistakes but I think that it was not an easy game, we played against a very strong team.
"Our performance was not the way we have been playing. It is important to think about the future and what are are the solutions.
"I think that the three substitutes, Negredo, Silva, (James) Milner, they played very well.
"They changed the match in the last 20 minutes but the goal of Negredo was just a little thing at the end.
"The difference between Bayern Munich and Manchester City was the difference you saw the whole game.
"There are a lot of reasons why this happened so it is very important for me to have the solutions. I was surprised by the game we played."