The Irish led 22-17 deep into injury-time but Ryan Crotty's try, converted by Aaron Cruden, meant Ireland remain without a victory over the All Blacks.
"You've got to be prepared to defend until the final seconds and we didn't," said the Ireland coach.
"We have to live with that now. A draw would also have been a loss to us."
New Zealand's victory completed a perfect 2013 campaign for the All Blacks as they registered their 14th straight win but the over-riding emotion in the packed Aviva Stadium was a crushing sense of Irish disappointment.
Sir Clive WoodwardEx-England coach & BBC Sport expert
"I think it was important for world rugby because this is a very good New Zealand team but it's not the best New Zealand team of all time, and they're certainly beatable. Yes, they've won every game this year, but I just feel Ireland showed the world you can beat this team. Even with Ireland losing today, it's great for world rugby and for the World Cup in a couple of years' time.""
Julian Savea's converted try cut Ireland's advantage to 22-7 by the interval and New Zealand went on to snatch victory after a Cruden penalty was followed by his conversions of tries from replacements Ben Franks and Crotty.
Eight minutes before Crotty's injury-time try, Ireland fly-half Jonathan Sexton had missed a kickable penalty chance which would have extended Ireland's lead to eight points.
"It was the one we were really up for," added Ireland coach Schmidt, who is a New Zealand native.
"[We] missed a penalty yeah but we got the ball back with 24 seconds to go.
"We had invested in winning that game. I just felt we didn't get the reward in the end."
Man of the match Sean O'Brien added that Ireland had been taught a harsh lesson.
"We're obviously not happy losing a game like that. We started off so well and to not finish them off, we've got to take a hard look at ourselves," the flanker told BBC Sport.
All Blacks deny Ireland in classic
"We've got to learn from this and put these types of games away. I don't want to be too negative but that is the blunt truth.
"They had that belief in the end and that is what we have to get to."
New Zealand coach Steve Hansen saluted his "special" team after the comeback win.
Hansen's team have lost only one game since he took over from Graham Henry after the 2011 World Cup although another defeat looked likely as the clock ticked down in Dublin.
"It wasn't the script, that's for sure," said the All Blacks coach. "I'd like to compliment Ireland on a sensational performance. They rattled us and they were outstanding.
"(But) I'm extremely proud of the 23 guys we had in our group today. To come from where we had to come from and claw our way across the line, it's a pretty special effort and it says why they are a special team.
"Everybody has a lot of faith in the group we had on the park and we just knew that if we could hold on to the ball for long enough, we were going to score."
New Zealand captain Richie McCaw, 32, felt that Sexton's 75th-minute penalty miss had been crucial.
"I thought if that had gone over it would have been game over but instead it missed and I could feel our players get a lift from that," said McCaw, who was winning his 124th cap.
"The Irish guys then tried to eat up time but I have always felt as a player that can backfire and so it did here."
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.