Mauricio Pochettino, who has been linked with City's neighbour Manchester United, needed his team to avoid defeat if it was to stand a chance of winning the group, but ultimately the host's dominance told.
Guardiola would have been frustrated with the amount of chances City spurned in the first half, though, particularly given Kylian Mbappe then put PSG in front four minutes into the second period.
PSG had improved considerably as an attacking threat, but City upped the intensity again and deservedly levelled through Raheem Sterling, before substitute Jesus completed an impressive victory.
RB Leipzig's win at Club Brugge means PSG will qualify for the knockout phase regardless, however.
City appeared in control almost from the outset, first going close after six minutes when Rodri's glancing header was cleared off the line by Presnel Kimpembe.
Keylor Navas then denied Riyad Mahrez at full-stretch shortly after Ilkay Gundogan hit the post from the centre of the box, with PSG creating precious little at the other end.
But PSG took a rare chance early in the second half, when Mbappe drilled through Ederson's legs after Lionel Messi's cross at the end of a flowing move fell kindly at the back post.
City's equaliser 13 minutes later was similarly well-worked, though, Rodri picking out Kyle Walker at the far post, whose pass across the face of goal was nudged on by Jesus for Sterling to prod home.
Jesus then got the winner 14 minutes from time, guiding in a composed finished after being delicately teed up by Bernardo Silva.