The Argentine says that the reported problems at the Catalan club after the Christmas break, including an alleged bust-up between coach Luis Enrique and Lionel Messi, has given the City players confidence.
"I think we have (lost any fear), especially as a result of what happened at Barcelona this winter that everyone is talking about in Spain," Caballero told Spanish newspaper Marca.
"They are not as strong a side as in recent years. That is going to help us and make us feel stronger."
Barca sports director Andoni Zubizarreta was sacked last month and president Josep Maria Bartomeu decided to bring forward elections to the end of this season.
"These club problems can also help us although you win games on the pitch and we need to concern ourselves about that," said Caballero, who joined City from Malaga ahead of this campaign and has generally been an understudy to Joe Hart.
City were knocked out of the Champions League by Barca last season but Caballero feels that the Premier League side is more experienced now ahead of the first leg in Manchester later this month.
"I think City learnt from that game and are now better prepared," he said.
"We cannot make the same kinds of mistakes because a club like Barcelona will punish you. We need to be at 100 percent for the two matches.
"Last season we ended up as (Premiership) champions and without doubt the blow of being knocked out by Barca motivated us to finish the season in the best possible way.
"We are now playing well, high up in the Premier League and improving all the time. In the Champions League it was an important bonus for us to qualify for the next round when we looked as though we were out with two or three games to go."
(Editing by Amlan Chakraborty)
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