Neil Lennon said his Celtic side "threw away" a place in the Champions League play-off round by conceding four "crazy" goals to CFR Cluj in Glasgow.
The Scottish champions lost 4-3 on the night - and 5-4 on aggregate - despite leading twice against the Romanians.
Celtic have now exited the competition at this stage in successive seasons, after losing to AEK Athens last term.
"We had the lead and we've let it slip through our own decision making," Lennon told BBC Scotland.
"The goals we conceded are crazy. You've got to do the basics well - you've got to stop crosses, close people down, get your head on things - and it was almost as if we scored and wanted to switch off.
"We've only ourselves to blame. If you don't do the basics defensively well enough then at this level you get punished. We've let it go."
Celtic trailed 2-1 on aggregate at half-time after Cirpian Deac headed Cluj into the lead, but appeared to have turned the tie around with goals from James Forrest and Odsonne Edouard.
However, Billel Omrani converted a penalty after captain Scott Brown handled and, although Ryan Christie restored Celtic's lead again, Omrani and George Tucudean struck to earn Cluj a shock win.
"We didn't compete in the first 45 minutes at all," said Lennon. "The second half we really had a lot more urgency but the goals we conceded are crazy. We needed that two-goal cushion really.
"What surprised me was our approach to the game. We've worked hard to get where we are and we've basically thrown it away.
"Now we need to look at the Europa League, make sure we qualify first then take it from there."
Lennon also defended his decision to start midfielder Callum McGregor at left-back in place of summer signing Boli Bolingoli.
"People can point at that but he [McGregor] did set up our equaliser and had a very good game," the manager said. "I don't think the left side was the problem tonight."
While Lennon argued the decision to start McGregor at left-back was not key to the defeat, many fans felt otherwise.
John: "Central midfield most certainly was a problem. Why? Because the best central midfielder at the club was playing left-back! Neil Lennon hasn't a notion."
Jock: "Callum McGregor is no left back. Huge loss in his natural position. Can't understand why we had £10m worth of defenders on the bench watching this calamity unfold."
Mike: "Neil Lennon, you have to take blame on this one. Wrong decision to play your best playmaker at full back. Then take lead again at 3-2 and still lose."
Zayne: "Defence still needs fixing. If Cluj can score four goals at home then spend some money Celtic. There are good teams in the Europa League if we do qualify."
Had they held on, then edged past Slavia Prague in the play-off round to reach the Champions League group stage, Celtic would have been guaranteed 15.25m euros (£14.13m). Instead, should they progress past AIK of Sweden or Sherrif Tiraspol of Moldova in the Europa League play-offs, they will pick up a comparatively paltry 2.92m euros (£2.71m).
There is also a large disparity in earnings from further success - a group-stage win in the Champions League is worth more than 2m euros more than a Europa League group-stage victory. Reaching the knockout stages in the Champions League is worth 9m euros more than advancing in the Europa League would secure.
Scotland's Uefa rankings coefficient could also be affected, although by how much depends on Celtic, Rangers and Aberdeen's performances in the remainder of the Europa League. Celtic also failed to reach the Champions League group stages last season, but that did not prevent Scottish football from securing its largest points haul for 11 years.