Olivier Giroud had an early spotkick saved before Marco Reus converted his for Dortmund. Samuel Chukwueze found an equaliser for Milan ahead of Dortmund settling the game thanks to goals from Jamie Bynoe-Gittens and Karim Adeyemi.
“I think we lost it the moment we could've directed the game our way, on the penalty but also just a minute before their second goal when we could've gone 2-1 up on the counter-attack and didn't finish it off," Pioli told Mediaset.
“When you don't score and then concede, that knocks the wind out of your sails. Obviously, losing Thiaw also damaged our defensive balance. We should've defended better on those situations.
“We were also able to create chances at the other end, which we knew would happen. There were moments when we should've put the game on our side and instead the momentum shifted the other way when our opponents were more clinical, sharper and more prepared to take those chances.
“Naturally, when Dortmund have those wide open spaces to attack into, they become very dangerous."
He added, “This was a disappointing evening for us, we knew this was a huge opportunity and that weighs on us. Now it is our duty to go to Newcastle, play a good game and try to win. It is still the Champions League, it is the last game of the group and we still have a small chance of qualifying."