Manchester City will not advance beyond the group stage of this season's Champions League.

The Citizens needed a win to stay alive in the hunt to emerge from Group D, but the English champions were held to a 1-1 draw by Real Madrid at the Etihad on Wednesday as the Spanish champions booked their place in the knockout round.

Real Madrid took an early lead when Karim Benzema ghosted in behind the City defense in the 10th minute, losing Maicon to turn in a deep cross at the back post.

The visitors nearly doubled the lead midway through the opening period when Sami Khedira wriggled through a pair of statuesque City defenders to go one- on-one with Joe Hart, but the England international pulled off a key save to deny the German midfielder.

City pushed for an equalizer in the second half and came within inches of drawing level in the 64th minute when Maicon's delivery to the back post found Sergio Aguero. The Argentine striker made a reactionary effort to convert the chance, but Iker Casillas produced a stunning point-blank save to preserve Madrid's one-goal advantage.

The tying goal eventually came after Aguero drew a foul in the box from minimal contact in the 72nd minute and converted the ensuing penalty to draw City even. City was given a considerable advantage when Alvaro Arbeloa was shown his second yellow card of the match for his challenge on the Argentine.

But Roberto Mancini's men failed to make the most of the extra man for the remaining 17-plus minutes as Real Madrid closed out the match to punch its ticket to the next round.

Real Madrid remains second in the group by improving to eight points while City bottoms the group on three points.

Borussia Dortmund preserved its position atop Group D by cruising to a 4-1 defeat of Ajax at the Amsterdam Arena on Wednesday. Marco Reus and Mario Gotze got the German champions off and running, and a brace from Robert Lewandowski sealed all three points despite Danny Hoesen's late consolation goal.

In Group C, AC Milan clinched a spot in the knockout round on Wednesday by earning a 3-1 victory over Belgian side Anderlecht.

The Italian giants will join Malaga in the next round after the Spanish side played to a 2-2 draw at Zenit earlier on Wednesday.

In Group B, Schalke and Arsenal advanced to the next round with wins on Wednesday. Christian Fuchs scored the lone goal in Schalke's 1-0 defeat of Olympiakos while Jack Wilshere and Lukas Podolski bagged second-half goals in Arsenal's 2-0 win over Montpellier.

And in Group A, Porto and PSG ensured their places in the knockout round with victories on Wednesday. Ezequiel Lavezzi scored twice to help PSG down Dynamo Kyiv 2-0, while Porto retained first place in the group by comfortably dispatching of Dinamo Zagreb 3-0.