Walker missed out on England selection for the second consecutive month, with Trent Alexander-Arnold and Kieran Trippier chosen ahead of the 29-year-old for next week's European Qualifiers against Czech Republic and Bulgaria.
"It's a big chance for him to show the manager from England how good he is," Guardiola said.
"In our sporting life it is always about challenges. He has one in front of him to show how good he is in every single game.
"He came as an incredible player and he is still an outstanding player. He is physically strong, fast and we have tried to help him to be a better player.
"He is a player who can do everything, but the national team manager has his opinion and he made a selection.
"Kyle respects it and I respect it. Gareth does what he does for the best of the national team."