Manchester City manager Pep Guardiola says his side is not ready to compete in Europe despite its derby win.

Pep Guardiola has claimed Manchester City is not ready to compete against the best sides in Europe, despite extending its winning start to the Premier League campaign with a 2-1 derby victory over Jose Mourinho's Manchester United.

Guardiola saw his team dominate in the first half at Old Trafford on Saturday, with Kevin De Bruyne and Kelechi Iheanacho giving the visitors a two-goal lead before United pulled one back through Zlatan Ibrahimovic.

And though United piled on the pressure after the interval, City — which now sits three points clear at the top of the Premier League — held firm to seal the spoils.

But Guardiola has claimed his players have to learn to make the most of their domination if they are to stand a chance against Europe's elite.

"In Bucharest we played at that level for 90 minutes. Against West Ham we played at the level in the first half. And same again today, we played really well in the first half, against a better level of player," said Guardiola, whose City side has been drawn against his former club Barcelona, as well as Celtic and Borussia Monchengladbach, in Group C of this season's Champions League.

"But I think if you ask me if we are ready to compete in Europe, then we are not ready. We are playing well but we need more in the forward areas. Until now in the Premier League we have been OK, but we are not ready to go against the best teams in Europe. But we have just two months together so we have time to get better.

"Especially today, in the final moments though we just missed the last pass, and then in the second half United made the changes and it was difficult for us. But when we did win the ball we had the chance for the counterattacks, and we had many, but we just didn't finish. So until we start to finish we will suffer."

Guardiola was also quizzed on his relationship with United manager Mourinho, but the former Bayern Munich boss was quick to play down the rivalry.

"It's not the first time I play against a Mourinho team," he said. "As soon as you lose the ball it is difficult, and especially with players like [Marcus] Rashford and [Anthony] Martial on the counterattack.

"I respect him a lot. What happened has happened. I didn't come here for that rivalry. I want to win. He wants to win. He has beat me and I have beat him. In the future I will beat him and he will beat me. It is simple. We are adults. Sometimes we do not agree but that is part of the game."