The Baggies gave as good as they got at the Etihad Stadium on Tuesday, with a bright opening to the contest suggesting that they could catch City napping.
They were, however, unable to turn pressure into goals and saw Edin Dzeko snatch what was to prove to the match winner 10 minutes before half-time.
Clarke felt that goal should never have stood, with the assistant referee failing to raise his flag against Carlos Tevez during the build-up.
He told Sky Sports: "I thought we were excellent, played well. We had a dodgy 10-minute spell in the first half, which came around about the goal.
"I am disappointed the decision with the goal went against us, because it was offside. People will say it's a close one but it doesn't matter, it's still offside. The linesman has got to get those decisions right. When you come to places like this, playing against teams of the quality of Manchester City, then you need the officials to be good.
"We started great. We had a little tactical switch, we decided to go with three at the back, something different. It's credit to the players that we are in the position we can do that at this stage of the season, we can experiment a little bit and look at different things. It worked really well for us, maybe we caught Manchester City out with the shape.
"We had chances, three or four in the first 10 minutes, and on another night one of those goes in and it could be different.
"I think the very least we deserved was a point, but we have to dust ourselves down, go to Carrow Road to face Norwich City in another difficult game on Sunday and try to get a win there.
"We want to try and secure eighth position. It's still in our hands. If we can pick up at least a win in the last two games, that might be enough to secure the eighth position - which would be a tremendous achievement for this group of players."