Bayern were favourites to advance to the Champions League last eight after a superb first half against holders Inter Milan on Tuesday, following their 1-0 win in Italy in the first leg.
But defensive weaknesses that have plagued them all season and a concentration lapse allowed Inter to come back and win 3-2 with an 88th minute goal to complete Bayern's misery after their German Cup exit and their poor Bundesliga title defence.
"This was a stab in the heart," said club CEO Karl-Heinz Rummenigge. "We must now try to rescue anything we can in the Bundesliga but that will not be easy. Somehow we have to regroup and get on with it."
Pressure is mounting on Bayern, who will host next year's Champions League final but face a tough challenge to finish second and qualify for the tournament automatically or at least finish in the top-three and play a qualifying round for Europe's premier competition.
"This was a self-inflicted defeat like so many this season," said coach Louis van Gaal, who has already fallen victim of their bad run and will be leaving at the end of the season, a year early.
"Now we must somehow drag the team out of that dark hole it is in because we still want to qualify for the Champions League."
"We did this to ourselves and it is not the first time this has happened this season," a stunned Arjen Robben said.
"We can talk about it and analyse it but we have been doing it all season. We can't rescue this season anymore."
