Pep Guardiola's side have impressed greatly following an unstoppable start to the season to prolong a 22-game unbeaten run in all competitions since April, and the Spurs boss believes they lead the way in Europe.
"They are the most in-form team in Europe," said Pochettino. "They are doing very well in the Premier League and Champions League showing unbelievable performances," he said, with Tottenham sitting eight points behind the Citizens at the top of the Premier League table.
"The challenge for them is to be consistent for the whole season but they show great quality," he continued, before insisting they are the most in-form team in the continent: "Today, right now, they are the best team in Europe."
Tottenham face Crystal Palace on Sunday as they attempt to reduce the deficit with Guardiola's side. To do so, Pochettino has urged his players to forget the historic Real Madrid win in midweek and concentrate on the domestic competition.
"We must be focused and use that result to lift us and build our confidence," he said. "But also to understand we must still work hard to get another good result."