Hart lost his place in the team earlier in the season following a number of mistakes but has been preferred to Costel Pantilimon for the past three games.
He made a series of important saves on Boxing Day to help City overcome Liverpool 2-1 in a thrilling game at the Etihad Stadium, and Pellegrini says he never had any doubts about the goalkeeper's ability.
"I was very pleased with Joe, not only today but all the games in the last month," said Pellegrini.
"He's worked very hard for a month and a half and now he's back to his best because he's the best goalkeeper in England."
Pellegrini also had praise for the City defence after they came from behind to maintain their perfect record at home this season.
"I am very happy with the response because it is not easy when you face such a difficult team, especially on the counter-attack when you are losing 1-0," he said.
"I think today we defended very well."
The City boss was particularly pleased to keep Luis Suarez relatively quiet, adding: "They did very well, especially against Suarez.
"He is a great striker. He is in his best moment so it was very difficult for our team not to lose one second in the whole match."