Speaking at a post-match conference Coleman conceded that his players looked tired against Fernando Santos' side, who took the lead via a header from captain Cristiano Ronaldo and sealed the win with a Nani goal, assisted by Ronaldo.
"They could only give what they had and we looked a bit tired tonight," he told reporters.
Despite bowing out of the tournament at the semi-final stages, Coleman insisted that his team had done Wales proud by becoming the first Welsh football outfit to progress past the group stages of any major international tournament.
"It hurts that we lost the semi-final, the players are gutted, but they need to look back and see they have done their country proud."
Speaking on the game Coleman gave Santos' side credit for the way they defended, despite the absence of their star centre-back Pepe.
"We never really found our momentum when we had possession, but you have to give Portugal credit, they defended deep and killed our space," he said.
Portugal will now face the winner of the other semi-final fixture, which will be contested between host-nation France and Germany on Thursday at the Stade Vélodrome.