The hosts failed to profit from a promising first-half display and were punished by their west London rivals after the break, with Andre Schurrle scoring a match-winning 17-minute hat-trick.
Fulham coach Magath was then left to rue a second half that was characterised by a lack of concentration from his players.
"I was satisfied with the first half, we had control over the game and did not give them many (chances)," the German said. "We had two or three good situations, (but) at half-time the players forget how to defend.
"I will remind them every day, we will do more defensive work on the training pitch.
"I have seldom seen a goal like the first today, he (Schurrle) runs over the whole field and nobody tackles him to score, that I've never seen before."
Despite the defeat leaving Fulham bottom of the table, the 60-year-old remains confident that they can avoid relegation, and expects to see a better performance against Cardiff City next weekend.
"We started well and fought very well but after they get one goal we haven't got the morale to come back," he added. "It was too difficult situation for the team at the moment.
"If we play well for 90 minutes next week we will win.
"You cannot expect that we win against the leading team, for us we have no win but nobody expected us to, the next game we will be better."