City were taught a harsh footballing lesson on Wednesday as they were swept aside by reigning European champions Bayern Munich at the Etihad Stadium.
For a club that has made its ambition to impose itself on the continental stage clear, the 3-1 loss was a definite reality check.
Yet Pellegrini, who has good experience in the competition after taking Villarreal and Malaga to the latter stages, is determined to fight on in his quest for glory.
He said: "We will try to do it. Nothing (final) has happened because we lost three points against Bayern.
"We will try to qualify from the group and if we qualify through the round of the last 16 in February, then all things can change.
"It will be very difficult to do it, but we will try.
"It was not our day. We conceded three goals and you can't give goals to a team like Bayern Munich, the best team in the world at this moment.
"That is too much of an advantage, but that happens sometimes and it was a pity it happened in such an important match.
"It was not a decisive match for the group but it was a very important match."
City showed their potential when they thrashed Manchester United in the Premier League a fortnight ago but there was a clear gulf in class between them and Bayern.
The German side dominated possession and cut through the hosts with quick and incisive passing and their margin of victory could have been much more emphatic.
Analysis of the game would suggest City could still be some years short of being a force at that level, but Pellegrini does not agree.
The Chilean said: "No, it's not a conclusion to draw after the game against Bayern Munich.
"I think we played against Bayern in the Audi Cup in Munich (in pre-season) and we did very well.
"It was a bad night, but of course to win the Champions League is not an easy task."
City were outnumbered in midfield by Bayern, who did not play with an out-and-out centre-forward.
Yaya Toure, City's outstanding player this term, was ineffective as Pep Guardiola's men cut him out of the game.
Pellegrini said: "I think that Yaya Toure has been a very important player for us during the whole season and he will continue in his same role but, like any other player, he can play a bad game."
Pellegrini could have tried to counter by deploying more midfielders and, indeed, after the late introduction of James Milner they did gain more of a grip.
One option not available to City in that area is Gareth Barry, who has joined Everton on a season-long loan.
Barry's experience could have been useful but Pellegrini does not believe allowing him to move was a mistake.
He said: "Barry has a lot of experience but I had four players in the same position - Yaya, Ferndandinho, (Jack) Rodwell and Javi Garcia.
"I think it was not good for him to stay here.
"He understood perfectly and he went to Everton without any problem for me or the club."
Bayern lead Champions League Group D by three points and City, realistically, are now facing a battle with CSKA Moscow for second place.
City midfielder Samir Nasri admits City can learn a lot from Bayern.
The Frenchman said: "I think we've just played against the best team in the world.
"We could see a lot of difference between us and them and we are going to work to be better by the time we play them again.
"We don't have the experience of playing together and getting results in the Champions League.
"For two years in a row they have been in the final. It's not just about talent, it's about cohesion, playing together.
"We are getting there, we are getting to know the new manager, but it takes time."