The result sees City leapfrog PSG and top Group A before the French side host RB Leipzig later on Tuesday.
"It was one of the best performances in Europe we've done so far," Guardiola said postmatch.
"We are all delighted. We were so good. If we can take three more points, to have nine points with two games left, we'll be close to qualifying for the next round."
City dominated possession from the start and Aymeric Laporte thought he put them in front after 13 minutes but his strike was ruled out for offside.
Just before the break, City were awarded a penalty after Stanley N'Soki brought down Mahrez inside the area and the winger stepped up to convert the spot kick.
The Premier League side grabbed a third after 53 minutes when Walker finished off another swift passing move.
City made it 4-0 after 67 minutes when substitute Palmer produced a clinical finish in the bottom corner to score his first Champions League goal.
City were unable to keep a clean sheet when Vanaken slotted the ball past Ederson to score.
Moments later, Mahrez grabbed his second goal of the night to seal an impressive win for the Premier League champions.
When asked about Cole's second-half cameo, Guardiola added: "Cole has a special quality in front of the box, a talent that is difficult to find.
"When he has the ball there, most of the time it ends up in the net. It's difficult to find that."
"I know how it works with young players. We have to be calm and patient.His place is the second team but at the same time he trains with us and works with our principles.
"I'm happy with the goal. He could have done a few actions a little bit better, but that is normal. It is experience."