Pep Guardiola admitted Manchester City lost their composure as Jamie Vardy hit a hat-trick in Leicester's stunning 5-2 win at the Etihad Stadium on Sunday.
Guardiola's side went ahead after just four minutes thanks to Riyad Mahrez's thunderous strike.
But that was as good as it got for City as Vardy tore Guardiola's creaky defence to pieces with his pace and movement.
Kyle Walker's foul on Vardy led to a penalty that the striker converted before the break.
Vardy struck again with a fine finish in the second half and netted another spot-kick after being fouled by Eric Garcia.
James Maddison's brilliant strike added Leicester's fourth before Nathan Ake scored his first City goal.
Youri Tielemans' penalty made it five, sealing Leicester's third successive victory and leaving City bruised after their most embarrassing league defeat under Guardiola since a 4-0 loss at Everton in 2017.
For the first time, in his 686th game as a manager with City, Bayern Munich and Barcelona, a Guardiola team conceded five goals .
"I think the problem was we put an extra pressure on ourselves to score the second one and the third one," Guardiola said.
"Leicester didn't want to play, just defend and counter-attack. In that position we have to be more calm."
It was the first time City had conceded five goals in a home league game since 2003 against Arsenal - a devastating setback after their win at Wolves in their Premier League opener last Monday.
"Anxious...we are not creating chances, we are not creating chances, we got nervous, and after, we give away three penalties. When you give away three penalties you cannot win," Guardiola said.
City looked even worse at the back than last season despite the signing of Bournemouth centre-back Ake.
Amid reports City could be about to sign Benfica centre-half Ruben Dias, Guardiola could have been forgiven for rushing to seal the deal once the final whistle blew.
While it is too early to write off City's title hopes, they will need to improve significantly if they are overhaul champions Liverpool.
"Of course it's hard, but still it's the second game in the Premier League," Guardiola said.
"We have to try to see what you have to do to avoid it next time. This is my job. Of course I feel bad for the guys, for the club. We have to analyse and improve."
Leicester boss Brendan Rodgers added: "I think to beat Manchester City you've got to run like hell, that's the first thing.
"We showed our quality, played the system very well, and it was an absolutely brilliant result and performance for us."
City were ahead in the fourth minute when James Justin could only half clear Kevin De Bruyne's corner and Mahrez smashed a superb strike into top corner from wide on the right-hand side of the Leicester area.
But after dominating the first half, City were rocked in the 37th minute.
Harvey Barnes' precise pass played Vardy in behind Walker and the City defender made a panicked tug on the Leicester striker that sent him tumbling.
Vardy picked himself up to drill the penalty high into the roof of the net. He showcased his predatory instincts again in the 54th minute.
Making a clever run to meet Timothy Castagne's low cross at the near-post, Vardy flicked the ball past Ederson with his trailing foot.
Garcia's push gave Leicester another penalty in the 58th minute.
Once again Vardy was ice cool from the spot as he completed just the third treble against a Guardiola team.
Maddison came off the bench to compound City's misery with his 25-yard curler into the top corner in the 77th minute.
Ake headed City's second in the 84th minute, but Benjamin Mendy fouled Maddison four minutes later and Tielemens made Leicester the first team in Premier League history to score three penalties in one game.