Sancho was named among the substitutes before coming off the bench in the second half to reduce the deficit in Dortmund's 3-1 defeat to Barca at Camp Nou on Wednesday.
Favre dropped Sancho – who was also hauled off in the first half of a 4-0 Klassiker rout at the hands of Bayern Munich earlier this month – for the midweek showdown after telling Sky Sports pre-game: "We need players on the pitch who are focused and ready".
After goals from Luis Suarez, Lionel Messi and Antoine Griezmann put the Group F contest beyond reach, Sancho provided a reminder of his immense quality with a fierce 77th-minute strike.
Asked why Sancho was benched post-match, head coach Favre told reporters: "I explained it before starting the game.
"I needed very focused players to press and that's why I named that XI."
Dortmund team-mate Mats Hummels was also quizzed on England international Sancho and he said: "I don't want to talk about it. He played really well in the second half, was really involved and scored a great goal."
The result leaves Dortmund third and level on seven points with second-placed Inter heading into the final matchday. Barcelona have clinched the group and sit on 11 points.
Dortmund face Slavia Prague on December 10, while Inter welcome Group F winners Barca to Milan on the same day.
"The last 20 minutes were really good, we scored and could have scored when it was 2-0," Favre, who is under growing pressure at the club, added. "We then are in a one-on-one situation in defence, and that's tough when you are up against Suarez and Messi.
"It's difficult to play here, they have many players who can make the difference. It's a very tricky phase for us at the moment, but I am convinced we can manage to turn things around."