The seventh-ranked Canadians, who looked rattled all tournament, needed only a draw on Monday against Australia but were eliminated with a 4-0 thrashing in front of a sea of green and yellow at Melbourne Rectangular Stadium.
"When we went into Tokyo I'm not sure anybody thought we would win an Olympic gold medal. I did. The team did. But I'm not sure anybody (else) did," a shell-shocked Priestman told reporters.
"You're coming into a very difficult group (at the World Cup). There's pressure. And you've got that target on your back. That's new territory. And I think that's the difference ... it's belief and pressure for me."
Canada - who became the first Olympic champions in history to exit in the opening round of the next World Cup - opened with a scoreless draw against Nigeria before edging Ireland 2-1.
On Monday, Australia's Hayley Raso netted in the ninth minute and had a brace by half-time in a game that felt funereal for the Canadians virtually from kick-off.
"At half-time (with Canada trailing 2-0) I told them, 'I believe. Do you believe?'" Priestman said. "We have to stick together, we have to believe.
"My (four) substitutions at half-time were trying to be brave and bold and chucking the kitchen sink at it, and that's all we tried to do.
"We had a game plan, and you can talk about Xs and Os, but it's behaviours within that. It's behaviours of getting up to the ball, playing forward, running at players.
"I keep saying the word 'belief,' and the group I've got in front of me are world-class players and can be a world-class team. We just need to believe it."
Monday marked the final appearance for Sophie Schmidt, who said she will retire after this, her fifth World Cup. The 35-year-old was one of the half-time substitutes and rifled a couple of shots over the Australia crossbar.
Canada's 40-year-old talisman Christine Sinclair, the world's leading international scorer with 190 goals, was never a threat and was substituted at the break for what was likely her final World Cup appearance.
"I think the reality is with Sinc, you only talk one game at a time. Could this be Christine Sinclair's last game? That breaks my heart," Priestman said, fighting back tears.
Her team will need to quickly shake off the heartbreak, the English coach said, with Olympic qualifying games scheduled for September.
Priestman believes Canada can learn and grow from their disappointing World Cup performance.
"There's moments where you get a smell or a whisper of something and that's been there, and I think it was there again tonight and I think that that's something this team will learn from," she said of Canada's nerves during the tournament.
"I think these moments, as hard and as harsh and as gutted as everybody is, you learn. I obviously didn't come here today thinking I was going home. But these are the moments that make you, and it hurts like hell now. But we'll learn."
