Despite finishing top of the newly formatted group stage with an impressive 21 points, Arne Slot's side faced a difficult last-16 draw against a formidable PSG, who remain unbeaten in Ligue 1 and, in Slot's words, are "statistically the best team in Europe."
Liverpool held a 1-0 aggregate lead after the first leg, but PSG's Ousmane Dembele levelled the tie in the return fixture.
The two sides could not be separated across 210 gruelling minutes, forcing the contest into penalties, where PSG triumphed 4-1 to seal their place in the quarter-finals.
Slot expressed pride in his team's performance but hinted that he may approach the league phase of next season's Champions League differently.
"I am feeling disappointed about being knocked out. I do feel in the end of the season, it does matter how we presented ourselves in Europe," Slot told the media after the game.
"I just said, we were not in the Champions League last season and this season we really showed ourselves. We can be proud of what we did. We won seven games in a row and then we played with our substitutes and lost against PSV.
"I think we played last week not our best game but today we saw a completely different Liverpool. We go out in a way that I think has impressed Europe.
"It is something now to take into consideration about how much worth it is to end up first in the league table if you can face Paris Saint-Germain in the next round.
"It is what it is. Maybe I am [speaking] too soon now but maybe it would be more fair that after the round in between, the one that wins the league table plays against the team that is lowest position after the teams have played.
"But that is also because we were so unlucky to play Paris Saint-Germain because we could have also gone to the other side of the draw.
"In the end, if you want to win the tournament you have to beat teams like Paris Saint-Germain and that's what we didn't do today after an incredible first 90 minutes of football from us."
Manchester City assistant coach Pep Lijnders heaped praise on Erling Haaland after his hat-trick in the 4-0 win over Liverpool in their FA Cup quarter-final on Saturday.
Erling Haaland delivered a ruthless hat-trick as Manchester City swept aside Liverpool 4-0 to book their place in an eighth consecutive FA Cup semi-final.
Ousmane Dembele delivered a decisive performance as Paris Saint-Germain beat Toulouse FC 3-1 to move four points clear at the top of Ligue 1, continuing their strong run with five wins from six matches in all competitions.
Pep Guardiola has insisted Phil Foden will soon return to his best form, dismissing concerns over the midfielder's recent dip in goals and assists.
