Sanchez is enjoying an outstanding season with Arsenal following his £30million summer move from Barcelona and has been the Gunners' chief threat throughout an otherwise mixed campaign.
The 26-year-old has netted 18 goals in Arsenal colours and Manchester City boss Pellegrini is well aware of the threat his countryman poses ahead of the London side's Barclays Premier League trip to the Etihad Stadium.
Pellegrini, 61, said: "I think Alexis is a very good player, he is having a very good season in England.
"It is not easy for a player in his first season here to score so many goals, (but) Alexis is repeating what he did in the last two seasons at Barcelona and scoring a lot of goals.
"I am very happy for him because he is a young player and a very enthusiastic player and improving.
"The football fans in Chile are very happy for him and for the country."
Sanchez's availability last summer also made him a target for other clubs, notably Liverpool, but Pellegrini claims adding him to the champions' ranks was not viable at the time.
He said: "It was not easy, he was a very expensive player in that moment.
"In the moment Barcelona sold him to Arsenal we were not searching for one striker because we had, in that moment, (Stevan) Jovetic, Aguero, (Alvaro) Negredo and (Edin) Dzeko, but I am sure Alexis can play everywhere."
Sunday's match could potentially see Sanchez come up against another of the Barclays Premier League's stars of the season in City's top scorer Sergio Aguero.
The prolific Aguero, who had scored 19 goals this term before suffering a knee injury in December, returned from a seven-game lay-off as a substitute last weekend.
Pellegrini said: "I don't want to compare (Sanchez) with Sergio, but the fans will be excited to see both teams
Both teams play very attractive football and they have very good players, so we hope we will see a very good match.
"It is a very important game
Arsenal are a strong team
I always say maybe they are not top of the table but they always have high targets for every season
I hope we will have a very good game and add three more points."
Captain Vincent Kompany is also set to return for City after hamstring and calf problems but midfielder Yaya Toure is away at the African Nations Cup
Arsenal manager Arsene Wenger believes victory over City would do wonders for the Gunners' confidence in the second half of the season
Since the 2012/13 season, Arsenal have managed only one victory in 12 league matches against teams that went on to finish in the top four and last year they were thrashed 6-3 at Manchester City, 6-0 at Chelsea and 5-1 at Liverpool.
Arsenal still have to host Manchester United and Chelsea before the end of the campaign and Wenger believes Sunday's result could start a turnaround in how the Gunners approach the top sides.
"We go into a period now where the confidence is important," Wenger said.
"We have big games until the end of the season and this can be a decisive game on that front.
"We believe we can win these games because we have done so in the Champions League many times
We just have to play with a bit more freedom."
Wenger continued: "Is it a self belief? Maybe
We did not perform last year in the top games away from home.
"I believe now we are much more stable and we can do it.
"For many years it was our strength but in the last two years, it is true that it has been a weakness
I think we can rectify it."
Defender Kieran Gibbs is likely to return for the Gunners after a heel problem, while Theo Walcott and Mesut Ozil are also in contention after coming off the bench against Stoke last Sunday
Danny Welbeck (thigh), Jack Wilshere (ankle), Mathieu Debuchy (shoulder), Mikel Arterta (ankle) and Abou Diaby (calf) are all ruled out.
Source : PA
Source: PA