Manchester United manager Sir Alex Ferguson has pledged to use his side's shock Champions League exit as a motivation for future success.
The three-time European champions lost 2-1 at Basel to finish third in Group C and will drop into the Europa League.
"Of course we're disappointed," said Ferguson. "You have to deal with the disappointment, and this club has used it as motivation many times.
"It's a loss because it's the best tournament in the world."
It is only the third time in 17 years that United have exited Europe's elite club competition at this stage.
They also become the first team to fall at the group stage the season after reaching the final.
United opened their campaign with a 1-1 draw in Benfica and were held 3-3 by Basel at Old Trafford in the second round of matches.
They then twice beat Otelul Galati 2-0 but drew 2-2 with Benfica at home and were beaten in Switzerland to confirm their fate.
"We were careless," said Ferguson of September's draw with Basel, when they let slip a 2-0 lead. "We let ourselves down badly."
United needed just a draw on Wednesday to qualify for the last 16 but suffered their first defeat in nine European games.
Basel took the lead through captain Marco Streller's half-volley following a goalkeeping error by David de Gea.
United hit the bar before falling further behind when Alexander Frei ghosted in behind Chris Smalling to nod home Xherdan Shaqiri's cross.
The visitors responded late on through a Phil Jones header, but Basel held on for victory.
Ferguson will now see his United team compete in the Europa League, Uefa's secondary club competition, for the first time.
Many of United's European games will be on Thursday nights, with domestic matches on Sundays.
"That is our penalty for not qualifying tonight," added the Scot. "It's a competition I've never been in with United. It does mean Sundays right through and Thursday-Sunday matches. That has to be dealt with.
"We had so much possession up to the last third of the field. Some of our play up to that point was very good, you have to say our finishing let us down.
"These young players will feel the disappointment, they are going to have to cope with it and go on with their careers."
Basel caretaker coach Heiko Vogel, who took over from Thorsten Fink in October, commented: "It was a great campaign. Today was a final in itself, but we had to put in a lot of hard work to get there.
"It's a sensation because it's not every day you beat Manchester United. Altogether, it was wonderful. I can just beam with pride. Tactically, mentally, physically, everything just worked right."