City have one foot in the final of the Capital One Cup after thrashing West Ham United 6-0 in midweek and will face Barcelona in the last 16 of the UEFA Champions League next month.
A third-round FA Cup replay at home to Blackburn Rovers awaits on Wednesday, while City can go top of the Premier League with victory at Newcastle United on Sunday.
Pellegrini has a fine array of options at his disposal and midfielder Milner believes this will stand City in good stead over the coming months.
"You look at the depth and if we do have injuries and suspensions, which unfortunately we will pick up, then we have a great squad of players to carry on," Milner told the Sun on Sunday.
"I think it is the best squad in the league. Our 6-3 win over Arsenal and beating Bayern Munich away in the Champions League, and having so many changes in the team that we had for those two games, shows the depth we have.
"It takes a squad of 23 or 25 to win the title, not a team of 11.
"It's important you have that and people are ready to perform at the level which is being set by whoever is playing when they come in."
The England international has won the Premier League and FA Cup during his time with City after former Newcastle boss Graeme Souness once said that you would 'never win anything with a team of James Milners'.
Milner has acknowledged he was spurred on by those comments and he is always determined to prove his critics wrong.
He added: "I was a lot younger and it was the manager who said it. That's obviously not ideal but things like that always drive me on.
"People doubt you and you have to have confidence in your own ability.
"Football divides opinion. People rate you and people don't. Whoever doesn't I try to change their opinion and that sort of drives me on, wanting to prove a point and prove people wrong.
"You have ups and downs in your career and I'm delighted with the trophies I have won and am desperate to win more here.
"We have a great chance to win every trophy this season, so it's important we perform in the latter stages. At the business end anything can happen."