Domenech is a big fan of Materazzi who was on the receiving end of the Zinedine Zidane head-butt that turned the Berlin Final around.
"He scored, he got his best opponent sent off and he converted his penalty. He was the star of the Final, not Andrea Pirlo," the 55-year-old said.
"It's not about insults, but provoking someone until they boil over. It happens in every sport, even volleyball across the net. On the pitch any way you can unbalance the opponent and exploit their weaknesses benefits your team.
"Whoever provokes shows strength, whoever reacts shows weakness.
"As a Coach I want my players to give the English response and give compliments after the game regardless of the insults during it."
Domenech was also keen to underline his respect for Italian football.
"You can say whatever you like, but the Italians have exceptional players and I admire them," he admitted.
"They play the most efficient football in Europe, perhaps the world, and I like it.
"We'll see who the great players are at the San Siro with 80,000 whistling fans."