The Reds only needed a point to qualify and finish top of the group but a team featuring six changes beat CSKA Moscow 2-1 at Old Trafford to advance in the tournament with five wins from six games.
Winning 2-0 against Benfica in Lisbon, Basel followed Manchester United to the round of 16.
The Champions League last-16 draw will take place in Nyon on Monday, December 11 at 11am GMT.
Chelsea and Manchester United progressed to the knockout stages, in second and first place respectively, while Celtic claimed third to guarantee European football in the New Year in the form of the Europa League.
Teams that already met in the same group or are from the same country can not be drawn against each other on Monday.
Atletico Madrid, finalists in two of the past four years, crashed out of Group C despite Saul Niguez heading home the opening goal at Chelsea on 56 minutes. Furthermore, only four times in the last 14 years has a full complement of La Liga teams reached the last 16.
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Only once before has one country had five participants in the Champions League and that was in 2015-16 when Spain had five clubs; Real Madrid, Barcelona, Atletico Madrid, Valencia and Europa League winners Sevilla.
The eight group winners will be seeded and will be away in the first-leg matches, which are scheduled for 13/14 and 20/21 February.
Manchester City: Basel (20), Bayern Munich (4), Juventus (5), Seville (7), Porto (12) or Real Madrid (1).
We're not saying English clubs and fans should not be excited and proud about the Premier League Champions League accomplishment, but it's worth keeping in mind how little has actually been accomplished so far.