The Spaniard is unsure if City, who have a sixteen point lead on top of the Premier League, are ready to win the competition.
Last season, the Sky Blues were knocked out at the round of 16 stage by Monaco, and Guardiola wants his team to go one further this term.
Asked whether the biggest sides in Europe would fear City in the Champions League this season, Guardiola answered: "I don't know. I don't know if we are ready or not.
"I have full confidence in the guys, there is no doubt about that. They know it. But the competition is special so I don't know.
"Our target is to do better than last season which is to go into the quarter-final, so that will be enough for the short-term.
"We did better this season than last season, we cannot deny. But this competition is so special in my experience. The teams are so clinical and you have to control the bad moments."