Manchester City manager Manuel Pellegrini accused Nacho Monreal of diving to win a penalty in Arsenal's 2-0 win at the Etihad Stadium but admitted his side performed poorly.
The Premier League champions were condemned to a first defeat in 15 games to leave them five points behind league leaders Chelsea, and Pellegrini felt their trip to Stamford Bridge on Jan. 31 is now a must-win game.
Referee Mike Dean gave a spot kick when City captain Vincent Kompany challenged Monreal, and Santi Cazorla put Arsenal 1-0 ahead. Pellegrini was unhappy with both players.
The Chilean said in his news conference: "I think it was not a penalty. The movement of Vincent was unnecessary. I think it was a very important action because we were nervous after the goal."
Pellegrini added on Sky Sports: "The movement of Kompany allows him [Nacho Monreal] to dive. I am not saying it was a bad mistake of the referee. The penalty changed the game, but it was not the reason we lost."
City failed to score at home for only the second time in the league this season, even though top scorer Sergio Aguero made his first start in seven weeks and Edin Dzeko returned as a substitute.
Pellegrini added: "I think we didn't play a good game. We run a lot have a lot of possession but we didn't have creative ideas to try and find the space against a team that defended very well. We weren't creative enough."
The Premier League's top two clash at the end of January, when Chelsea could stretch their advantage at the top of the table to eight points.
And Pellegrini said: "The game we must play at Stamford Bridge is very important. We must close the gap to two points."
City were without vice-captain Yaya Toure, who is at the African Nations Cup, and have not won a league match in his absence since April.
But Pellegrini, harking back to early-season criticism of the 31-year-old, insisted he would not use that as an excuse.
"I think Yaya is a very important player," he said. "Maybe at the beginning of the season when we were not playing well, you say Yaya should be out of the team but I never have excuses. We play other games without Yaya and can win also. I never have excuses why we don't win with one player or two players [out]."