Pep Guardiola was pleased with how his three youngsters performed despite seeing his side lose for the first time this season.
Guardiola’s men had not lost in any competition since an extra-time defeat to Arsenal in last season’s FA Cup semi-final.
Only Everton and Wolves, who eventually lost on penalties, have stopped City winning inside 90 minutes this season but Shakhtar surged ahead with first-half goals from Bernardo and Ismaily in Ukraine.
Guardiola made seven changes to his line-up with one eye firmly on Sunday’s Manchester derby, with England under-17 World Cup winner Phil Foden handed his first City start in an unfamiliar left-sided role.
Sergio Aguero was sent on with just over 20 minutes left and scored from the spot in stoppage time but Shakhtar held on for victory and qualification for the knockout stages.
Guardiola told BT Sport/ESPN: “Congratulations to Shakhtar. They played a good game but we did too.
“We started really well. We fought, I’m so pleased for Tosin (Adarabioyo), Brahim (Diaz) and Phil, how good they played in the Champions League against a real good team like Shakhtar Donetsk.
“We came here to win but we could not.
“I’m pleased with the performance.”