Dortmund, who lost last week to RB Leipzig in the Bundesliga, took the lead and went toe-to-toe with City for much of the game until the English champions scored two late goals, including Erling Haaland's outrageous 84th-minute winner against his former club.
"We can be proud of our performance," Dortmund sports director Sebastian Kehl said. "But this comes with the obligation to also show on Saturday a really good performance."
This is the first derby since Schalke's return to the Bundesliga this season after they were relegated in 2021 and the Royal Blues are desperate to give the hosts a run for their money in Germany's biggest derby.
"This is not only about victory for the fans. We also want the win very much and this is an extremely important game," Kehl said.
"If we play on Saturday as we did against City then there can only be one winner."
Another slip-up would pile more pressure on the team, currently in fifth place in the table on 12 points, two off leaders Union Berlin.
Dortmund have been struggling with injuries this season, having already lost new striker Sebastien Haller, who is being treated for testicular cancer. His replacement Anthony Modeste has so far failed to make an impact.
They are also without injured midfielder Mo Dahoud, starting keeper Gregor Kobel and Jamie Bynoe-Gittens.
Schalke had failed to win any of their first five Bundesliga matches this season but a 3-1 victory over VfL Bochum last week primed them for the derby.
Their six points from six games so far is almost as many as they had in the entire first half of the 2020/21 campaign (7) when they ended up being relegated.
With a young team with very limited derby experience, Schalke are looking to spring a surprise.
"We are obviously not the favourites in this game but the derby writes its own script," said Schalke reserve keeper Ralf Faehrmann, one of the few players who have played in Ruhr valley derbies.
"From a sporting quality Dortmund are better but we will go out and want to show that we have the bigger heart, that we are where we belong, in the top division. We want to make the club proud and let's see what comes out in the end."
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