Two goals from Nolan Roux helped secure Lille the win, as Monaco slipped three points behind leaders PSG - who thrashed Lorient 4-0 on Friday night.
Toulalan said while Monaco were not at their best, a two-goal loss was hard to swallow.
"I don't think we really deserved to lose today, even though we did not perform well," Toulalan said.
"In the first half our performance was not good but we were better during the second half. I think we deserved at least a draw and to lose this game is harsh on us."
Toulalan said a packed fixture did Claudio Ranieri's side harm, and said with a little luck they would have taken a point from their league clash.
"We're tired because of all the games we played and as I often say, we can't be at our best each game, it's harder for us because of the work we are having to put in," he said.
"It's normal, every team goes through bad periods.
"But the second half was better, we had many chances. Overall, Lille got less chances than us but they were more efficient and took their chances."
Toulalan said his side were not thinking about winning the league and their target was a Champions League spot, with the club sitting comfortably inside the top three in second on 25 points - with Nantes five points back and outside the CL spots in fourth.
"The priority is to qualify for the Champions League," he said.
"Obviously we will do our best to try and match Paris and push them for the title.
"However I will repeat once again, the priority for us is to make the Champions League.
"We're on track, but with the team we have, we have to do better, that is for sure."
