The Italian, who is leading the riders' championship on 102 points, failed to shine at his home circuit on Saturday afternoon.
Posting a 1:46.923, he finished 0.434s short of pole position which went to fellow Italian Andrea Iannone on board the Ducati.
Rossi's time eventually saw him finish P8 but the nine-time World Champ is far from disappointed as that is the position he started from in both the races he has already won this season.
"Just like previous races this season, here in Mugello the level, the speed and the lap times are a lot faster than last year," said the 36-year-old.
"Marquez rode the lap time of the pole position last time and he's just in thirteenth place, so it‘s a big step forward.
"I improved a lot and my lap time was not so bad, but it wasn't enough.
"It looks like the extra soft tyre worked very well, so our competitors who could use this option were very strong.
"All the top riders were able to improve their pace a lot, so apart from my starting position on the third row, which is not fantastic, I'm quite happy about today.
"We worked well on the bike and I improved my feeling and my pace. It will be a hard race, but we will see tomorrow."