The coach defended his team's record this season in the face of numerous injuries and thinks that los Blancos have improved since Carlo Ancelotti took charge
The Schwarzgelben face Carlo Ancelotti's men on Wednesday at the Santiago Bernabeu in the quarter-final first leg then have the advantage of playing the second leg at Signal Iduna Park.
Despite being without suspended striker Robert Lewandowski - their hero when they knocked out los Blancos a year ago in the last four - and a long injury list, Klopp is confident that his team are just as good as 12 months ago.
"With our budget and the likes of Neven Subotic, Sven Bender, Ilkay Gundogan, Marcel Schmelzer and Jakub Blaszczykowski on the injury list, there is no doubt that we are the underdogs, the Cinderella of this tie," the coach told Marca.
"But I always say we don't have to be the best team in the world, we just have to be able to beat the best team in the world in a head-on clash and Dortmund can beat the best.
"That's the most important thing for me. Dortmund will take their chances and, who knows, we might even win!
"I don't think we're worse than last season. It's been a very difficult season from the beginning. We have faced extraordinary challenges and an unprecedented injury crisis. I've never seen anything like it.
"But, in spite of everything, we are on the road to achieving all the goals we set ourselves at the start of the season. So you can't talk about us playing worse or not being as strong as we were.
"We're second in the Bundesliga, we're in the DFB-Pokal semi-finals and we have made it to the quarter-finals of the Champions League, just like last year. And don't forget, we came top in the toughest Champions League group just like we did last season... we never give up."
Regardless of his confidence in BVB pulling off a surprise, Klopp is wary of newcomers this season such as Gareth Bale and believes they have undoubtedly improved over the last 12 months under Carlo Ancelotti.
They have bought some good players like Bale and Isco," he added. "They have tremendous strength in every position, a full team of skilled players capable of success in all the competitions they play in.
"I think this Real squad is even better than the previous one. They have great attacking power and they defend well."
Klopp head into the tie on the back of a 3-2 win on Saturday, while Madrid defeated Rayo Vallecano 5-0 to turn around their fortunes after back-to-back losses.