The 20-year-old appears to have edged ahead of Kasper Schmeichel in the pecking order at City, reflecting well on Pearce after he agreed a £1.5million deal last year to buy the youngster from Shrewsbury.
"We thought it might be a slow process but he has the coaching there and the opportunity to make a name for himself.
"He's got a fantastic club to get a good grounding. He's not the finished article but he wants to learn and get better and better.
"The sky is the limit. He's not there yet, nor is anyone in the squad, but there are great talents. Joe is in that category."
Pearce won 78 caps for England and played in a defence protecting legends such as Peter Shilton and David Seaman, and he feels Hart has the ability to reach the top of his profession.
He added: "The modern goalkeeper needs to have things like being good on the backpass - he is that. But he also needs to be unshakeable - he is that too.
"The big part is being mentally strong. Physically he has all the tools to be a top goalkeeper."