The UAE Pro League outfit host Al Hilal in the second leg of their semi-final on Tuesday and trail their Saudi Arabian opponents 3-0 on aggregate.
Dalic felt his side capitulated in the last 30 minutes of the first leg on September 16 as Nasser Al Shamrani - who netted twice - and Thiago Neves put Al Hilal almost out of sight.
However, Al Ain - competition winners in 2003 - received a morale boost with a 4-0 win at Ajman on Wednesday.
Mohamed Abdulrahman, Miroslav Stoch, Asamoah Gyan and Mohammed Fawzi Al Jahwar all scored and Dalic feels his side are still alive - despite acknowledging the size of the task they face.
"The first goal [in the first leg against Al Hilal] blasted the confidence of our players and this led to two more goals and this big result," Dalic said.
"We controlled the match in the first half but we missed the good players who can score from the chances that we created.
"I know that the defeat is heavy. But we will try our best in order to level things in the second leg."
Gyan has been prolific in the Champions League, scoring 12 goals in 11 matches this season, and Dalic will be banking on the Ghana forward to shine once again.
Al Hilal also enter the match on the back of a morale-boosting win after an early strike from Salem Al Dawsari - who scored in both legs of their last-16 triumph against Bunyodkor - and Rabeaa Sefiani's late own goal helped them to a 2-1 league win at Al Fateh on Wednesday.
That result continued Al Hilal's unbeaten start to the Saudi Arabian top-flight season.
Al Shamrani has scored nine goals in the Champions League this term and looms as Al Hilal's danger man.
Al Hilal have twice won Asia's premier club competition - most recently in 2000 - while they have also lost two finals.
