The 25-year-old will lead the line in the Premier League as West Ham aim for a European finish next season.
"We signed Sebastian Haller because we need a striker and he is an important striker for our squad," Pellegrini said about the new signing.
"He had a very good season in the Bundesliga and Haller will play more as a centre forward, but he can also play as a winger so we have another option on the wing.
"So, we needed to find a new one and we have different options now. He is not only a box player, he will play well outside of the box. It will be his first season in England and I know he will be a good striker for our team.