The two went on to have hugely successful seasons with Bayern Munich and Inter Milan respectively, winning a host of trophies domestically before meeting in the Champions League final at the end of May and playing together in the World Cup final last Sunday.
Pellegrini says the two should have been kept.
"(Florentino Perez) sold players that I considered important. We had a difference of opinion with regards to the building of the squad," he said.
"We didn't win the Champions League because we didn't have a squad properly structured to be able to win it - that was my main discrepancy with Florentino Perez."
Despite ending up without a title, Pellegrini led Madrid to their most successful season ever in terms of league points, pushing champions Barcelona all the way until the last round of Primera Division matches.
Nevertheless, the former Villarreal coach believes he would have been axed even if he had managed to win the Primera Division title.
"Even if I had won the league I would have been out," he said.
"I didn't have a voice or a vote."