Manchester City were hammered 4-0 by Tottenham at the Etihad Stadium, extending their losing run to five matches in all competitions.
Spaniard Guardiola's decision means he will spend more than a decade at the club he joined in 2016 and has led to a dazzling array of silverware, including six Premier League titles and one Champions League crown.
Manchester City have lost each of their last four matches in all competitions, and Pep Guardiola admitted he is worried.
City's 4-1 defeat to Sporting Lisbon on Tuesday was a third straight loss for the English champions -- the first time that has happened since 2018.
Pep Guardiola believes Manchester City will struggle to overcome a mounting injury crisis but encouraged the English champions to bounce back in Tuesday's Champions League trip to Sporting Lisbon.
Sporting Lisbon coach Ruben Amorim, who will take over at Manchester United next week, hailed Manchester City manager Pep Guardiola as the best in the world on Monday.
The defeat dropped City to second spot, two points behind Liverpool who recovered to beat Brighton & Hove Albion 2-1.
Pep Guardiola says Manchester City face an "emergency" in certain positions as he grapples with a punishing injury list ahead of Saturday's trip to Bournemouth.
"What can I say?," said the Spaniard. "First, to congratulate him and all his family and their friends, it's incredible news for him and for all of us."
“He [Palmer] was asking for two seasons to leave and I said stay. He said he wanted to leave. What could we do?” Goal.com quoted Guardiola.
Manchester City’s defence of the UEFA Champions League came to a heartbreaking end when they failed to put away a resilient Real Madrid, going down 4-3 on penalties, at the Etihad Stadium on Wednesday.
Chelsea forward Cole Palmer has emerged as a Player of the Year contender thanks to a dazzling campaign that left Manchester City boss Pep Guardiola to rue what might have been ahead of their reunion in Saturday's FA Cup semi-final.
Pep Guardiola has revealed Erling Haaland could miss Manchester City's FA Cup semi-final against Chelsea at Wembley on Saturday.
For this season though, in City’s level of perfection, this is perhaps coming short of the high standards they’ve set themselves.
Antonio Rudiger scored the decisive penalty as Real Madrid beat holders Manchester City in an edge-of-your-seat 4-3 shootout victory to reach the semi-finals of the Champions League for a record-extending 17th time after the teams were locked at 4-4 on aggregate following extra time on Wednesday.
"Congratulations to Real Madrid, they defend so deep, with incredible solidarity," Guardiola said. "We did everything. I have no regrets about what we've done. Defensively, offensively, we played exceptional in all departments, in everything, and unfortunately we couldn't win, so that's what it is."
"They like to play with the pressure. They like to know - dead or alive."
Pep Guardiola said Manchester City are in a privileged position to be fighting to defend a treble of trophies after beating Luton 5-1 to go top of the Premier League on Saturday.
Manchester City moved to the top of the Premier League as lowly Luton were eased aside 5-1 at the Etihad on Saturday.