Demichelis has come in for severe criticism after his sending off in City's Champions League loss to Barcelona on Tuesday.
The Argentinian defender was caught out by Lionel Messi and brought his compatriot down to concede a penalty in what proved the game's pivotal moment.
It was merely the latest in a growing catalogue of errors against Demichelis' name after particularly poor performances in recent games against Watford and Chelsea.
Yet Demichelis, formerly of Bayern Munich and Malaga, has established himself as first choice in central defence alongside Vincent Kompany and Pellegrini has no complaints.
Pellegrini, who felt the foul on Messi in the 2-0 loss occurred outside the box, said: "I think he played very well until the penalty and I think maybe it's (just) a fraction of a second (late), and he thought he arrived to the ball.
"I think he is a very important player. He is in a very good performance for the moment.
"I think Vincent Kompany and him are playing well so he is a very useful player for us."
Demichelis has moved ahead of Matija Nastasic in the pecking order at the Etihad Stadium, although the Serbian is sidelined with a knee injury.
City's other senior centre-back is England international Joleon Lescott but he appears to be heading out of the club as his contract comes to an end in the summer.
City were linked with a number of other defenders in the January transfer window, most notably Porto's Eliaquim Mangala on deadline day, but Pellegrini does not regret not forcing through a deal.
He said: "No, I don't regret it. One of the reasons we thought about that was because Joleon Lescott wanted to go, but Lescott is (still) here and with Demichelis, Nastasic and Kompany we have enough for the position."
Pellegrini also has no doubt the experienced Demichelis, 33, can handle the recent heavy criticism of his displays.
He said: "He has had a long career, he has had a lot of years playing football for important teams like River Plate, Bayern Munich and Manchester City.
"He doesn't have any problem with the criticism. All the players must be used to accepting criticism and accepting (praise) when they play well.
"But, I repeat, I don't think Demichelis made a bad game."