The champions’ status as Premier League title favourites has been called into question after a number of frustrating results in recent outings.
City were held to a draw by struggling Everton a fortnight ago and Guardiola admitted his team fell way below the standard he expects as they were dumped out of the Carabao Cup by Southampton in midweek.
City, second in the table, were also beaten by Brentford in their final match before the World Cup break in November.
By contrast, United have hit a rich vein of form and will head into Saturday’s derby showdown at Old Trafford fourth in the table and on the back of a run of eight successive wins in all competitions.
Erik ten Hag’s men have lost just once in 18 games since they were thrashed 6-3 by City at the Etihad Stadium in October and Guardiola now sees them as challengers in the title race.
The City manager said: “They are nine points behind Arsenal, we are five, four in front of United.
“There are 60-63 points to play for – lots of games – so, they are there.
“From my experience, when you say title challengers, you have to see the way they are playing, in those terms.
“To have confidence, my team or another team, it’s about the way we played, how consistent we are, not (just) results. It’s how your best players are playing.
“When I see the way United are playing, why not? Their play is good.
“It is nice for us, the challenge to prove ourselves again.”
United’s season began in dismal fashion as they lost to Brighton and then suffered a humiliating 4-0 hammering at Brentford.
Guardiola has been impressed how Ten Hag has turned the situation around.
“I had the feeling that the strength and quality of Man United was always there,” he said.
“It’s just a question of being settled, patient and supporting the manager unconditionally. United are playing now how they played all their history.
“I said a few months ago that United are back. People say they’re not. They’re back. I knew it, I felt it.
“I’m not a big fan for United – honestly – but the success is fine, it’s good. He (Ten Hag) deserves it. He’s doing really well and it will be a good game to prove ourselves.”
Guardiola revealed he had to deliver a few harsh truths to his players after their loss at Southampton but, after all their successes of recent years, has no doubt they will bounce back.
He said: “The performance at Southampton I’ve never seen before but it happened. We have an average, whether we win or lose, and it’s below this average.
“But I don’t doubt for one single result. Just because we have been eliminated from the Carabao Cup, will I have doubts? No way. That is impossible – but I have to tell them the truth.”