But, after only losing to one of the game's true heavyweights by conceding two late goals, City talisman Toure is convinced progress is being made.
The 29-year-old Ivory Coast midfielder said: "I think we played against a fantastic team. Real Madrid have a big history, they are a big club. It was quite good for us to play against them to see what level we are at now.
"I think we played well and we are continuing to learn how to play in Europe. We have a lot of young players and I think it is very good for us, although we lost.
"I think we have a couple of important games coming up and for us it is very important this year to go to the second round."
Toure felt the intensity of the game at the Bernabeu would stand the team in good stead should they reach the knockout stages.
City withstood a barrage before sparking a five-goal flurry in the final 22 minutes by taking the lead through Edin Dzeko.
Marcelo equalised but Aleksandar Kolarov put Roberto Mancini's men in front again only for Karim Benzema and Cristiano Ronaldo to strike in the last three minutes.
Toure added: "The game was like a quarter-final of the Champions League. It was a fantastic game.
"I think for us it is not too bad, we have to keep improving, keep working hard and next time we will be better than that.
"We have a fantastic squad and a fantastic manager, we have to continue working like that. In a couple of months I think we will be better."
City, who return to domestic action against Arsenal this weekend, host Dortmund in their next Champions League game in a fortnight's time.