The Premier League winners must beat the Spanish giants in their Group D clash at the Etihad Stadium to retain just a slim hope of reaching the knockout stages.
Even then they would need to follow up by beating Borussia Dortmund in Germany in a fortnight and still hope other results went in their favour to progress.
Mourinho says that is not going to happen and feels that must be damaging for a team that should be capable of winning the Champions League.
The former Chelsea boss said: "I think they are a team to win the competition - one of the teams to win the competition.
"I think it is normal if a big team doesn't win the competition because there are other teams with the same power, desire and responsibility, and only one can win.
"I don't think it is normal when you are out of the competition at the very early stage.
"I speak for myself. If Real Madrid loses a final or semi-final, or even a quarter-final, that is football.
"When you are out at the group phase it is more difficult to accept and understand.
"Last season they are out, and I think this season they will be out again.
"I think they can win tomorrow [Wednesday], of course they can, and they can also win in Dortmund, why not, but eight points is not enough.
"So I think they are out for the second consecutive time and that must be difficult for them."
Real are well placed to qualify themselves even though it is Dortmund that top the group with eight points.
Mourinho's side have seven with Ajax on four and City two in a tough group comprised of domestic champions.
Mourinho, for whom the game will be his 100th in the Champions League, said: "This is a very difficult group. Since the beginning we knew a big team is out, probably two.
"We know every mistake costs and we have known since the beginning everything in this group is in risk.
"Other teams are playing easy groups and have known from day one they would qualify easily.
"City, Real Madrid and Borussia all want to win the competition, we all can but we all know we can be out in the group stage, especially as Ajax are also taking points and have some ambitions."
Real got their campaign off to a winning start when they came from behind to beat City 3-2 in the latter stages of their opening game at the Bernabeu two months ago.
Mourinho, a twice winner of the Champions League, said: "That game was crucial, for sure.
"If City had won that match the history would be different.
"We had a fantastic reaction in that match and those three points are crucial for us to be in a position where, I'm not saying were are completely safe but, we depend on ourselves."
Given his past successes with Porto, Chelsea, Inter Milan and now Real, coupled with the notoriously short shelf-life of the coach's job at the Bernabeu, Mourinho's future is often the subject of speculation.
The 49-year-old, who has regularly spoken of his love for England, has been linked with a return to the Premier League and again teased journalists by suggesting he could come back.
He said: "If I can speak of the beauty of my experience - the chance I had to leave my country to make the lap, to go around England, Italy, Spain and to get the best and worst of these experiences to make me a better manager.
"After that, when you have the experience of the most important countries, I think the normal thing is to evaluate, decide where you are happier and make the choice for the future."
When asked if that specifically meant England, he said: "I don't think it is interesting to talk about my career and my future.
"We are here to talk about a Champions League game. That is what we are here for and that is what we are going to talk about."
In terms of coming back to the country with Real, however, he said: "I never hide my feelings, even if that makes some people not so happy, but I always said how much I loved my time here and I always like to be back.
"I know when you play in England you have difficult matches, difficult opponents, difficult atmospheres because the crowd is always very strong behind the team.
"But I like that, I enjoy that. Also my players are happy to play."
Real will be without the injured Michael Essien, Gonzalo Higuain, Marcelo and Alvaro Morata at Eastlands.