Ibrahimovic had a goal and an assist in the game, but it wasn't enough as LAFC advanced to the conference finals after winning the first postseason edition of the city rivalry.
When asked where he'll be playing, Ibrahimovic said it's "too early to speak" on whether he'll return for another season with the Galaxy.
"I have another two months [on my contract]," Ibrahimovic said after the match. "We'll see what happens. ... [If I stay], then MLS is good, because the whole world will watch it. If I don't stay, nobody will remember what MLS is."
McBride: Zlatan's MLS jibes 'pissed me off'
Brian McBride is fuming after Zlatan Ibrahimovic claimed 'nobody will remember what MLS is' if he leaves.
Since arriving to the Galaxy in 2018, Ibrahimovic has taken the league by storm with his scoring prowess, with 53 goals in 58 matches. Before arriving to MLS, he had an illustrious career in Europe with stints at Ajax, Inter, Barcelona, Milan, Paris Saint-Germain and Manchester United.
It was the Galaxy's first loss in the six editions of the El Tráfico rivalry. After Carlos Vela staked LAFC to an early lead with a dominant performance, Adama Diomande scored twice as a second-half substitute.
Ibrahimovic set up Cristian Pavon's goal and then drilled home a tying goal early in the second half. Romain Alessandrini set up a header to trim LAFC's lead to 4-3, but Diomande then chipped in the clinching goal in the 80th minute.
"There was a lot of goals," Zlatan said. "That's always exciting and fun, but no one wants to lose. The whole season has been, we score a couple of goals and we concede much more than we score. We should be sad and disappointed. We made mistakes and they punished us."
Ibrahimovic aimed an indecent gesture at an LAFC fan. As Ibrahimovic left the pitch he seemed to take exception to the fan's boasting, staring the supporter down while grabbing his own crotch.
When asked about the gesture, Ibrahimovic said: "How many fans came? 30,000? They said something."
ESPN's Jeff Carlisle and The Associated Press contributed to this report.