The Premier League side qualified for the quarter-finals at the expense of the La Liga giants, and will now face French side Lyon, who defied the odds to progress against Juventus.
Raheem Sterling and Gabriel Jesus capitalized on Real Madrid’s blemishes to send the Citizens to Lisbon.
Despite their emphatic 4-2 win on aggregate, Guardiola has advised his side to be calm and take the games as they come, and still thinks there are a lot of good teams that can be a threat to their Champions League hopes.
"To win the Champions League you have to beat a lot of teams. There are still Bayern Munich, Lyon, Barcelona, Napoli, Atletico Madrid - so many good teams,” the former Bayern Munich and Barcelona gaffer said after City’s victory over Zinedine Zidane’s men.
"Important first step for our confidence, for our future. But last 16 we still have three games to try and achieve for the second time in our history the semi-final. That is why we have to be so calm.”
"It is important. The big clubs is when you lift the titles. We will be aware we can do it but lets see how we recover.'
Guardiola has now eliminated Real Madrid in the knockout stages of the Champions League twice; the third manager to do so after Marcello Lippi and Ottmar Hitzfeld.
