The Eagles were two goals down midway through the second half when James McArthur had a goal wrongfully disallowed for offside.
The decision denied Palace the chance to go within a goal of the reigning champions before Yaya Toure wrapped it up nine minutes from time at the Etihad Stadium, leaving Warnock with a sour taste in his mouth.
"It was a disgraceful decision," Warnock said after the defeat.
"The linesman was in a terrible position.
"I don't understand why top-class officials get it wrong like that.
"There is no explanation for it. The linesman will be disappointed when he sees (a replay) but that's no consolation to me. It was a game-changing decision.
"You could tell the crowd were nervous. It could have been 2-1 with 20 minutes go but it's a canter for them all because of that.
"You have to do your job right if you are at the top level if you are a linesman.
"It's not hard to look over and see. It's not even close, it's miles onside.
"I think we could have come away with something. That's why I am bitterly disappointed because we worked so hard all week and it's nothing to do with us why that goal gets chalked off. We could have put them under the cosh for 20 minutes.
"I wish I was still working in the media so I could say what I want without getting fined."
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