As of right now, it is understood that City have their eyes on Wolfsburg midfielder Kevin de Bruyne, Juventus midfielder Paul Pogba and Liverpool striker Raheem Sterling.
City did not manage to acquire a top-tier player last summer and Pellegrini pointed out that his side cannot afford to make the same mistake once again.
"Big teams need to sign a big player," he said during a press conference. "It is very difficult to do it every year — but every two years you must do it.
"I'm not just talking about Manchester City. You see Real Madrid, Manchester United, Chelsea, Barcelona and Bayern Munich — all the big clubs — all do it. It is important to have big names."
However, Pellegrini also admitted that City desperately need an English player since Frank Lampard will be leaving the club this summer, while James Milner is likely to depart as well.
"We do need English players and we need good players," he said.