Foden started for City as they topped their Champions League group after victory against Hoffenheim.
It capped an impressive week for the 18-year-old, who signed a six-year contract worth £30,000-a-week at Manchester City.
"He's an outstanding young player, England has a diamond," Guardiola told 'Sky Sports News' after the game.
"He played like a man, a real man. Phil was incredible the way he played in the second half. It's not just the quality he has with the ball. He looks skinny, looks like he's not strong but he's really strong."
He added on 'BT Sport': "He was incredible. We don't have any doubts about his quality. He has to compete with David Silva, Ilkay Gundogan, Kevin de Bruyne, but he can do everything.
"He is a fighter, can score goals, has the body shape. He is only 18 years old. We didn't have any doubts that he can play at the top level."