Toure suggested this week that he might be interested in a new challenge and the Ivorian's agent has said the 31-year-old would not be short of suitors if he decided to end his five-year spell in Manchester.
But Pellegrini believes the powerful Ivorian wants to stay and has urged the midfielder to play a crucial role in helping City compete for honours again after a season without a trophy.
“He can have a new challenge here at City,” Pellegrini told a news conference. “I am still sure he is very, very happy here. We have a project here and every year we are working hard to improve.
“You can't win the league title every year, but we are always working to improve the squad and the challenge is still there for him.”
Fourth-placed City host FA Cup finalists Aston Villa on Saturday hoping to leapfrog neighbours Manchester United, who are a point ahead and play Everton on Sunday.
Tim Sherwood's Villa are 15th in the table and not yet safe from relegation.
“One thing is the final of the FA Cup, the other thing is battling against relegation. For this reason, it will be a very tough game,” Pellegrini said.
“They are a team that try to play as an offensive team. We are used to playing eight or nine players defending.
“It depends on the way they play but we will continue our style. I know we have made mistakes but we continue to be the team who play the most attractive football and score the most goals.
“We are more thinking about the one point gap above us than the seven point gap below - we keep a positive mind.”
Captain Vincent Kompany will miss the Villa game along with Gael Clichy, Samir Nasri and Stevan Jovetic, but midfielders James Milner and David Silva will be fit along with striker Wilfried Bony. – Reuters
Original source: Pellegrini urges Toure to stay