Sterling joined his new team-mates in his first City training session on Friday after flying to Australia to join their pre-season tour, and Pellegrini reckons the England forward can make a big difference for City.
"I think that Raheem can play in different positions - he can play as a forward because he has a lot of speed or he can play also on the wing," Pellegrini said on the club's website
"He's a very young player so he has a lot of things to improve
I think it's important for him to have a new challenge in our team where he will play with great players which will improve his game
He will also improve us as a team.
"I think that Raheem has already demonstrated what he can do as a player at Liverpool but he's just 20 years old so he has a lot of things to improve.
"It will depend how he works over the next few years but I am sure he will be very important in our team, especially for his speed."
Pellegrini said Sterling will sit out Saturday's match against sister club Melbourne City after his late arrival, but he will feature soon with matches against Roma and Real Madrid to follow during the tour.
The size of the fee City ended up paying for Sterling - almost twice their original offer earlier in the summer - raised eyebrows, but Pellegrini said it was a reflection of the market
"We must continue to have a competitive team," he said
"I always say there are four or five important teams, so if you don't improve every year it's very difficult.
"The price is so difficult to see - it depends on the performance of the player in the next years
Every time you need a player the price is very high - not just for City, but for every team.
"The price is not the most important thing - the most important thing is to choose the player you need."
City captain Vincent Kompany also welcomed Sterling to the club.
"I'd rather play with him than against him," the defender said
"He'll fit in really well in our team - everyone in our team is buzzing that we're getting such a good player in our team
Whatever he needs, we'll be there to help him.
"I can guarantee you he's going to feel at home very quickly here and we're all eager to see him perform like he can.
"Raheem has proven so many times that he's an incredible talent and he's been welcomed like he should be."
Source : PA
Source: PA