In a contest with minimal chances across both halves, substitute Gabriel Martinelli snatched victory for the Gunners four minutes from time when his deflected strike off the head of Nathan Ake wrongfooted Ederson before pinging into the back of the net.
After suffering a 2-1 loss at Wolverhampton Wanderers last weekend, the Citizens have now tasted back-to-back Premier League defeats for the first time since December 2018.
Man City have also seen their 12-game winning streak against Arsenal, dating back to 2017, come to an end, and the reigning champions have slipped two points behind both the Gunners and Tottenham Hotspur in the Premier League table – the latter of whom sit pretty at the summit on goal difference heading into the international break.
Nevertheless, Guardiola has praised his players and expects them to bounce back from their recent setbacks as they endeavour to win a fourth successive Premier League title.
"One deflection, We had 10-15 really good moments in the first half, [Arsenal] started really well in the second half, they increased they intensity," Guardiola told BBC Sport. It was a tight game. Not many chances, one deflection and we conceded a goal.
"It was a tight game. We defended really well, the players gave everything. No regrets at all, it is football, we lost the game. Maybe we need to be a little bit behind our contenders after what has happened in the past. We will come back stronger."Man City have lost all three domestic games without the presence of star midfielder Rodri, who was forced to serve a three-match ban after being sent off for violent conduct in the 2-0 win over Nottingham Forest last month.
Guardiola has acknowledged the importance of Rodri in his Man City team, who boast just a 37.5% win ratio in the Premier League when they have been without Spaniard.
"Rodri is an important player, but he is not there for the reason (for the defeats). Everyone knows and we have to move forward and find a solution," said Guardiola.
"Rodri is an important player in the middle, his presence, his personality - everything. But every game is completely different."
Guardiola has admitted that his players are not used to feeling disappointed after a defeat, but the Man City boss has praised their character and hopes they can all return unscathed from the international break later this month ahead of a busy fixture schedule.
"I have gratitude for the guys, they gave everything," Guardiola said in his post-match press conference. "I know how disappointed they are because they are not used to it.
"It is football, it happens. We do not have to win the Premier League. No team ever has won four Premier League in a row. We are behind but it is October. Last season it happened but the season is long.
"We have people coming back and we will try to beat upcoming opponents like Brighton and [Manchester] United. We will continue."
Man City will face both Brighton and Man United in their next two Premier League games, before taking on Bournemouth, Chelsea, Liverpool, Tottenham Hotspur and Aston Villa, as well as managing Champions League group-stage duties.
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