The Spaniard, known for his meticulous approach, admitted he struggles to leave out fit players and prefers managing a smaller group.
"I said to the club I don't want that (a bigger squad)," said Guardiola.
"I don't want to leave five or six players in the freezer. I don't want that. I will quit. Make a shorter squad, I will stay.
"It's impossible for my soul to (tell) my players in the tribune that they cannot play."
His comments come as Manchester City prepare for a significant post-season rebuild, with several senior players expected to depart.
Kevin De Bruyne, a stalwart of City's recent success, is understood to have played his final home game during Tuesday's 3-1 victory over Bournemouth.
The changes follow a disappointing campaign in which City's historic run of four consecutive Premier League titles came to an end.
Last weekend's defeat to Crystal Palace in the FA Cup final confirmed the club will finish the season without a major trophy for the first time in eight years.
Injuries have also plagued Guardiola's squad throughout the season. Key midfielder Rodri missed several months and only returned as a second-half substitute in Tuesday's match - his first appearance since September.
Despite the fitness setbacks, Guardiola remains firmly against inflating the squad size. Instead, he is keen to integrate academy talent rather than stockpile experienced professionals.