The Citizens are eight points behind Liverpool in the race to win the Premier League title.
While they are still in with a shout, Gundogan knows that losing and going 11 points behind may put it out of reach.
Asked if it was a must win, Gundogan told reporters: "To stay in the title race, probably yes, because 11 points would be a huge gap. It's still early in the season.
"There are still a lot of games to play and a lot of things can happen, not just on our side but at every other team. But obviously we have to look at ourselves and try to do the things we can do better, as quickly as possible.
"We take it, stay humble, head down and try to put in the work in the next few days and prepare as well as possible for a tough game.
"Anfield is always tough, no matter the situation. We've struggled in recent years going there and we know Liverpool are a great team full of confidence right now.
"It's going to be as tough as it is possible to be. But that sums up the situation right now. It seems we have to go through this season the toughest way possible."