City understandably failed to maintain the intensity of their first-half display and Salah got the decisive goal when he followed up after Ederson had denied Sadio Mane with a wonderfully-judged chipped finish past the despairing Nicolas Otamendi in the 56th minute.
Things couldn't have started better for the Blues as Gabriel Jesus scored after two minutes to give City hope.
"We can not compare what we've done in the Premier League when we are here", said Guardiola.
Guardiola admitted beforehand that his side needed the "perfect" performance and the hosts got the ideal start as they opened the scoring after just 117 seconds. I was expecting something like that but I liked the reaction immediately after that.
"I don't care who is in (the draw), we are there and we deserved it and so far we fought for each opportunity to get it and then used it".
In the aftermath of the celebrations on Merseyside, defender Lovren shed some light on his dressing room tirade, admitting that along with some tactical adjustments by Jurgen Klopp, the Reds played with more urgency after the restart because of his rant.
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Kevin De Bruyne tested Loris Karius with a low drive in the 27th minute and the home side had an appeal for a penalty turned down when former Liverpool forward Sterling went down in the box with Andy Robertson's arms around him.
The frustration for Liverpool is that they have not been able to convert that into more of a challenge on the domestic front, trailing City by 17 points in the league. But [Antonio] Mateu Lahoz is a special guy. Replays showed Liverpool midfielder James Milner played the ball in the Germany winger's direction.
Alex Oxlade-Chamberlain shot over on a rare Liverpool attack before the visitors survived another scare just before the interval as Sane had a goal chalked off.
Lahoz wrongly disallowed Leroy Sane's goal in the first half at the Etihad Stadium, before Guardiola was sent to the stands by the referee as the players returned to the dressing rooms. Who else but Mo Salah to deliver the away goal which took the tie out of City's reach?
It was always going to require something extraordinary for City to progress but Liverpool's two strikes after the break from Salah and Roberto Firmino killed any such hope for Guardiola.
Guardiola, watching in the stands, put his head in his hands as his side's European campaign ended.