Toure was excluded from the City squad for the knock-out phase after Guardiola decided the Ivorian did not feature in his plans - something he now puts down to "many physical reasons".
That decision caused Toure's agent, Dimitri Seluk, to hit out at Guardiola in the press, which in turn lead to Toure being excluded from match day squads until Seluk apologised.
Toure then lost 8 kilograms in weight as he worked to get back into the team and he has proven to be a key player for City since earning a recall at Crystal Palace in November.
And with Ilkay Gundogan now ruled out for the rest of the season due to a serious knee injury, Guardiola will reinstate Toure to his squad list at the expense of the Germany midfielder.
"Definitely yes," Guardiola responded when asked if the midfielder would return. "He deserves that. In the first part of the season he was not able [to play], in the first first part for many physical reasons, in the second part you know why [the dispute with Seluk], but of course he deserves to be in the Champions League in the second round."
Guardiola, however, would not discuss the possibility of offering Toure a new contract.
The 33-year-old's current deal expires this summer, but Guardiola would not be draw on his intentions: "We are going to talk at the end of the season."
Toure is one of six City players whose contracts expire at the end of the summer, alongside Willy Caballero, Bacary Sagna, Pablo Zabaleta, Gael Clichy and Jesus Navas.
Guardiola was similarly evasive regarding whether any of them will be offered new deals, but warned that they would find themselves out of the team if they are "angry or upset" about their situations.
But the Catalan says that has not been a problem until now and doubts it will be in the coming months.
"They have to play every game for himself, for their families and for the team," the City boss added. "Of course we are concerned about that, but they are so professional. We are going to decide in the next month or at the end of the season, we have to see how to develop the team until the end of the season."
He added: "They will not be professionals if they don’t have the contract and they don’t want to play. Maybe it’s happened in the past, last season, but it depends on them. If they are angry or upset because they aren’t renewing their contract they are not going to play, another guy will play.
"The four or five guys in that situation, I see them every single training session and in the games, and until now I am glad with how they are doing."