Jhon Duran gave Villa an early lead before Morgan Rogers doubled the Birmingham club's advantage in the 65th minute.
Phil Foden's stoppage-time goal for visitors City came too late to change the result as Villa climbed above Guardiola's men into fifth place in the table.
Defeat extended the worst run of Guardiola's celebrated managerial career but the City boss was adamant he and his players could regain their confidence, telling TNT Sports: "Step by step, we have nice personalities in the team and sooner or later we are going to find it."
Guardiola praised a Villa side managed by fellow Spanish boss Unai Emery by saying: "Congratulations Aston Villa and keep going. In the mid-block they are so strong.
"We have good moments, we had chances, more chances than in the (Manchester) United game, but in the second half we dropped and our pressing was not good enough... We found a goal in the end, but too late."
This result meant previously prolific striker Erling Haaland, a key figure while City were winning an unprecedented four successive Premier League titles, has now scored just once in his last six appearances.
"Of course we are disappointed," he said. It's not good enough, it's not good enough from me."
Haaland added: "We have to continue. First I'm looking at myself, I haven't been doing things good enough, I haven't been scoring my chances. I have to do better, I haven't been good enough."
Haaland, however, backed Guardiola to oversee a City revival.
"He (Guardiola) won the Premier League six times in seven years, so we will never forget that," said Haaland.
"He will find the solutions. He has been doing that every single year. We still believe in him, we have to work harder than ever right now."
