The defeat leaves the Anfield outfit struggling to make the knockout stages and was their fourth consecutive defeat in all competitions.
But Carragher insists they will respond positively: 'The last four games have been poor and we are going through a rough patch, but we will come through it.
'We know that we have the fight and character to turn things around, and with the backing of the fans we know we can still achieve big things.'
Lyon scored their winning goal in injury time, and Carragher admitted he didn’t contemplate losing the game.
'It would have been very disappointing to draw the game, but to lose it is a big blow,' he said.
'We are all massively disappointed and we have it all to do in the group now, but you never know how the results will go in the rest of the group, and we know we can still qualify.'
Liverpool welcome Premier League champions and bitter rivals Manchester United to Anfield on Sunday, and Carragher believes it could be the perfect game for the struggling Merseysiders.
'The games with Manchester United are always great, and they are a very good side,' he concluded.
'But this could be the sort of game that we need to turn things around and get our season going.'
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