The Welsh side slipped to a late defeat against Croatia at the Liberty Stadium on Tuesday that leaves them 10 points shy of top spot in Group A with four qualifiers left to play
Former Arsenal striker Eduardo's winner two minutes from time was the fatal blow that brought a premature end to Coleman's aspirations of leading the Welsh side to their first major finals since 1958.
The 42-year-old had targeted a maximum six point haul from the games against Scotland and Croatia and looked on course to achieve that when Gareth Bale scored from the spot in the first half before Dejan Lovren and Eduardo struck late on.
It leaves Wales 10 points behind Group A pacesetters Belgium with just four qualifers remaining and, while mathematically they can still qualify, Coleman admits it is unlikely.
"We are gutted, even though we knew before the game we would be up against a very good team," he told the Telegraph.
"We felt we could have come in 2-0 up, but we could not get that elusive second goal.
"We then probably defended too deep too early in the second half, because it is human nature to protect your lead against such a good team.
"We needed the three points if we were going to do anything in the group and give us an outside chance really. We are not going to qualify now."