Hodgson signed Sterling for Liverpool and gave him his England debut. Palace will face the winger when City visit Selhurst Park today.
He said: “He was always a fantastic midfielder, a very hard worker, made good runs most of the time. I remember in Switzerland, he played in behind the front players, like he was for Liverpool, and he was quite outstanding.
“The criticism levelled at him was much to my displeasure and the attention he was getting elsewhere from social media and sometimes the media itself was draining his confidence.
“I think the big thing for Raheem is there is no drain in his confidence, there is no doubt about his ability. Of course he is playing in a team that is creating lots of chances so when he gets in the right areas he is able to score goals."
“On this subject too, I must add that his maturity as a person has been really fascinating to watch.
“All of the responsibility he has accepted and not just as a Manchester City player but shouldering a heavy burden with the racism and the attention that is being paid to this racism problem that we have.
“He has been a brilliant spokesperson. I heap praise on him in the hope he will repay me by playing very badly."