Ancelotti admits his side were not at their best against Roberto Mancini’s side and admits City deserved all three points.
He told Sky Sports: “We didn’t play how we wanted, we suffered the pressure in midfield from Manchester City but we were not able to use our play and we had a difficult day. [There was] too much complication to our play and we didn’t have the possibility to show our quality.
“I think Manchester City had a very good performance, they won in midfield, they won a lot of tackles [and] I think Manchester City deserved to win.”
City are now four points behind Chelsea, and Ancelotti has failed to rule the Eastlands club out of the title race.
“At this time of the season it is difficult to say [if a defeat would have ruled them out of the title race]. I think that Manchester City have a possibility as they have a lot of quality to fight for the title,” he said.
“We didn’t have a lot of chances because we didn’t play quick in the opponents’ half, there was not the space to attack.”
Ancelotti replaced Didier Drogba with Daniel Sturridge as his side looked for a late equaliser, and confirmed it was a tactical decision to take the Ivorian off.
“It was not an injury, [it was a] tactical decision,” he said.
“I wanted to use more speed up front, I wanted to use the speed of [Daniel] Sturridge on the right side.”
Asked if he felt Drogba reacted well to being substituted, Ancelotti added: “I think so.”