By SABC Sport
17th February 2024
The champions sold Palmer, one of their highly-rated academy prospects, to Chelsea last summer.
The 21-year-old, a member of City's treble-winning squad last season, has shone since the switch and been the London club's standout player this term.
Guardiola admits he did not give the youngster, who faces City at the Etihad Stadium on Saturday, the minutes he wanted and understands his reasons for moving.
The City manager said: "For young players, we always want them to stay but this is normal. After two or three seasons he wanted more minutes than he had the last season. I understand completely.
"If Palmer had the minutes I gave to Phil (Foden) from the beginning, Cole Palmer would be here - but I didn't give them to him. That is my responsibility.
"Why? Because of Bernardo (Silva), Riyad (Mahrez), Phil. In that moment, I chose the other ones.
"After one season it is nice, and the second season, but the third season it is, 'Oh guys, I want to play, I don't want to sit on the bench'.
"It's normal. We understand as a club. We got an offer from an incredible top club like Chelsea and I'm really happy for him. In all clubs these types of things happen."
Palmer scored Chelsea's late equaliser against City from the penalty spot when the sides met at Stamford Bridge in November.
He is Chelsea's leading scorer this season with 12 goals in all competitions and their top assist-maker with nine.
Guardiola said: "We knew the quality he has and the impact he has shown this season is enormous.
"It is not just goals and assists, it is the quality. He is an incredible threat for Chelsea."
While Palmer may be excelling elsewhere, City have hardly missed him as they have moved into a strong position to retain all three of the major trophies they won last season.
Their consistency and dominance in games led pundits including Gary Neville, the former Manchester United defender, to debate recently whether City are actually a boring team to watch.
Guardiola is pleased his side have reached a level where this is being discussed.
"Thank you for the compliment," he said. "What can I say? It's fine.
"Everything is so difficult in football. You have to do so many things to try to win games and what these players have done for many years, and this season as well, is admirable.
"Hats off to my players. It's just unbelievable the way that my players are consistent and take seriously our opponents."
Guardiola does not feel such debates suggest he or his team do not get due credit for their achievements.
He said: "Of course we have credit. We are admired, I am pretty sure of that.
"People in the world of football know how difficult it is, being there for six or seven years in all competitions.
"In the future you will not forget. It looks easy, but it's not."