Kenny Shiels said "you cannot legislate for mistakes" after Austria severely dented Northern Ireland's 2023 World Cup hopes with a 3-1 victory.
Austria netted three times in nine second-half minutes to capitalise on defensive errors in Wiener Neustadt.
Northern Ireland are now three points behind Austria, who look set to secure second place and a play-off.
"There was a little bit of nervousness and tension in the players because they knew the reward," Shiels said.
After a 2-2 draw in Belfast in October, Northern Ireland and Austria went into the match level on points in Group D, five behind leaders England.
With head-to-head deciding placings, and with both teams set to face the Lionesses and lower-ranked opposition in their final three games, the winner was set to move into pole position to secure a play-off spot for next summer's tournament in Australia and New Zealand.
After a goalless first-half, Carina Wenninger flicked home after evading marker Sarah McFadden at a corner two minutes after the restart, while a mix-up between Julie Nelson and Jackie Burns gifted Nicole Billa a second. Barbara Dunst made it three after more poor defending from the visitors.
Joely Andrews netted a late consolation, and Shiels said he was "proud" of his players' effort against a side ranked 25 places higher despite the "clumsy" errors.
"I don't think it was a disappointing night in terms of how our players performed," he said.
"We played better football in the second half and we dominated most of the second half, but you can't legislate for mistakes.
"There was a player not picking up from a corner kick and two gifts that were given to them, but I'm so proud of the girls.
"Against a country like Austria it was always going to be difficult but nothing fell for us. You could see in the second half we were bombarding them and it is just disappointing that we couldn't get our goal a little bit earlier."
After admitting his players were nervous with the occasion, which had been billed as a 'cup final' pre-match, Shiels says Northern Ireland must learn from the experience ahead of the Euro 2022 finals, where Austria, England and Norway await in Group A.
"There were key players who were a little bit nervous but I told them not to be. I pre-warned them about it because of the hype that the match had.
"It is a good experience for the Euros because it lets them see that this was a big, big game for them.
"It was tough for the girls. We had such good spells of possession and nearly scored on three, four or five occasions. They didn't do that to us and they were worried.
"The girls will go home in the morning and think they gave as good as they got. If you take the mistakes out of it we were slightly better for them. We made more mistakes than them and we got punished.
"It's not the end of the world for them because deep down there is preparation for the Euros."
Northern Ireland have to regroup quickly for Tuesday's fixture with the Lionesses, who travel to a sold-out Windsor Park with 16,000 set to be in attendance.
The game will be the biggest women's football match to be played in Northern Ireland.
"Onwards and upwards. We will try and get up again and go for England," said Shiels.
"It's a big fixture for the girls and for the country. I think it is great for the girls, what they have done for football in this country is phenomenal.
"In a short period of time we are filling Windsor - it's an incredible achievement."