Many had expected the 37-year-old to be selected on account of the role that he played in securing the Games for London.
However, Neville believes that it would have been wrong to pick Beckham for any reason other than his footballing ability.
"There will be people who will argue that David does deserve a position in the GB team for helping to bring the Games here," said Neville. "But I think David wanted to be selected on his own merits, for his talent, skill and ability.
"He goes beyond football in his reach around the world and selection for a football team is different from the ambassadorial role he has. We're talking about Stuart Pearce and David Beckham, two brilliant professionals over 15 or 20 years, who wouldn't look at any other reasons other than football reasons.
"I've spoken to him and he's disappointed. He wanted to be part of it and it was a dream of his. This would have been a great occasion for him, but professionally, I can understand that there are difficult decisions to be made and you have to respect the professional decision that a manager makes."
Pearce's side face Brazil at Middlesbrough's Riverside Stadium in their final warm-up match tomorrow evening.