The 46-year-old has accepted that Die Schwarzgelben, who are 12 points off top spot, must now concentrate on finishing in the Champions League places.
Die Schwarzgelben currently sit fourth in the standings, 12 points adrift of their Bavarian rivals, who have also played one game less.
Consequently, Klopp feels that Dortmund is no longer in a position to win the title, conceding that the target now must be on finishing second.
"The initial premise for the second half of the season is that we are fourth, trailing by many points behind Bayern Munich, who also have a game in hand," the 46-year-old German told reporters. "Bayern Munich isn't our aim for the moment. We are focusing on Augsburg, and then we want to pass in front of the teams that are ahead of us.
"That should be possible. It's not a certainty but it should be possible. And our fighting spirit is definitely awake to achieve this."
Dortmund resumes its Bundesliga campaign against Augsburg at Signal Iduna Park on Saturday buoyed by four friendly victories during the winter break.
"The question of whether our preparation went well can only fully be answered on Saturday which will also depend on our opponent," Klopp warned. "Everything that we have been able to assess, like many of you have witnessed, has been assessed.
"The boys have trained extensively with very few free days because we felt like we wanted to use as much of the time as possible and it was necessary."