After finding Bayern Munich and Napoli too hot to handle 12 months ago, City at least had the consolation of winning the Premier League title.

But in European terms, Roberto Mancini's men have yet to make the grade after Sergio Aguero's second-half penalty yesterday garnered only their third point from five outings, leaving nine-times continental kings Real to cruise into the last 16.

The Spanish were joined by Schalke and Borussia Dortmund of Germany, England's Arsenal, Paris Saint Germain of France, and Italian giants AC Milan.

Two-times champions Porto, 3-0 winners over Dinamo Zagreb, and debutants Malaga, who drew 2-2 at Zenit St Petersburg, had already qualified before the fifth round of group action.

Had City managed to hold onto a 2-1 lead in Madrid in the opening match in Group D it could all have been so different - but Real fought back to win 3-2 and two dropped home points against Dortmund and four more spurned against Ajax closed the door firmly shut on the English side's ambitions.

City's England keeper Joe Hart was brutally frank in his assessment.

"All the games cost us - we've lost our two away games and not won at home. It's been a bad campaign for us. It's incredibly frustrating," Hart told Sky Sports.

"Unfortunately, we weren't able to do the business when it mattered."

Real all but bolted the gate by taking the lead on ten minutes.

Luka Modric found Angel Di Maria and he swept a high ball into the danger zone for French striker Karim Benzema to leave marker Maicon for dead and sweep home from close range.

Real were on the back foot after Alvaro Arbeloa earned a second yellow card for bringing down Aguero in the box 18 minutes from the end and the Argentinian striker sent Casillas the wrong way.

But that was as good as it got for City - though Aguero could have had an earlier goal when he saw Casillas block a close-range effort right on the line.

Former United star Cristiano Ronaldo had a comparatively quiet return to Manchester – but Real joined Dortmund in the knockout phase - though the Germans win the group as they thrashed Ajax 4-1 away to move onto 11 points to Real's eight.

Arsenal meanwhile moved into the last 16 after second-half goals from Jack Wilshere and Lukas Podolski enabled the Gunners to see off French no-hopers Montpellier to ensure they go through with Schalke, who still top Group B by a point after a 1-0 success over Olympiakos pushed the Greeks out of contention.

AC Milan moved through to the knockout phase for the 11th straight season in a Group C which Malaga have dominated after the Italians won 3-1 away to Anderlecht.

Malaga won the group with their draw in Saint Petersburg.