The Argentina international has been showered with praise in recent weeks having scored eight goals in City's last five matches.
However, Pellegrini believes that there is more to come from the 26-year-old, who has won two Premier League titles with the North-West outfit.
"I don't think it is the best we have seen from Sergio," Pellegrini told reporters. "Here at City in 2011-12, when the club won the title, he was a very important player and last season he was also very important especially in the first part of the year when he was not injured.
"I was always sure he would return to his normal performances [after injuries] and I think he can get even better."
City will take on West Ham United away at Upton Park tomorrow.