The Dragons had done well to keep their opponents at bay in the World Cup qualifier in Osijek until a mistake at the back in the 27th minute allowed the hosts to make the breakthrough.
Wales captain Ashley Williams underhit a back-pass which goalkeeper Lewis Price could only strike against Mario Mandzukic, who duly tucked the ball home.
Eduardo then wrapped up a well-deserved win for Croatia with a close-range finish in the 58th minute.
It was a third defeat for Wales from their opening four Group A fixtures as they failed to build on Friday's 2-1 victory over Scotland, and reflecting on the latest loss, Coleman said: "I feel a lot better tonight than I did after the Serbia game (a 6-1 defeat).
"I thought our boys stuck at it and showed a lot of heart.
"They played with a lot of passion, and they had to just to stay in the game.
"But we make one mistake at the moment defensively and we get punished.
"You don't expect that from an experienced player like Ashley, who is a quality defender.
"We know that end of the pitch is difficult, and obviously Pricey comes out, kicks it and it rebounds off the striker.
"We have to cut that out to give ourselves a chance.
"As hard as we fought, we have to cut out individual errors like that."
Williams' back-pass did appear to be slowed down by the poor playing surface, but Coleman was not about to blame the pitch for what happened.
"The conditions were difficult, but I wouldn't put the defeat down to that," Coleman said.
"Croatia are a very good team.
"They play a lot of fluid football and are very good with the ball.
"They have some excellent individuals and I think that of all the teams we have played so far, they are definitely for me the toughest team we have come up against.
"But with their first goal, for all their good play, we have really given them a goal.
"So that was a bit frustrating."
Although Belgium - who Wales lost 2-0 to at home in their opening qualifier - and Croatia are both on 10 points now at the top of Group A, Coleman is refusing to give up entirely on the prospect of the Dragons making Brazil 2014.
"We have six games left and everybody is going to be taking points off each other, especially at home," Coleman said.
"So you never say never.
"But it was always going to be difficult from the start.
"We have lost to Belgium, Serbia away and Croatia away.
"They are three very tough games, and even Scotland at home is a tough game."