Royle told the Manchester Evening News: "Richard really is a proper chap and a fine player.
"I gave him his debut at two different Premier League clubs and all the subsequent managers at City and with the Republic of Ireland have been quick to make him a cornerstone of the team. The fans have also voted him their player of the season for the last four campaigns and we can't all be wrong!
"There was a period when I left City when some people at the club had him on their hit list. I bet they're now glad they didn't get their way.
"The stories about his drinking and ill-discipline were always exaggerated and he was always going to mature into a top-notch central defender.
"I am glad he is staying at City because it is a great club and a great club for Dunney in particular. It is rare these days that players stay so long at one club but everything is right for Richard at City and he is a good captain for the club.
"It is significant that Mark Hughes was so keen to keep Dunney. He knows that the big fella and Micah Richards form a formidable partnership at the heart of the defence. There are not too many better combinations around than those two and plenty of clubs would like the pair of them."