"I have a commitment to make Manchester City my priority. I have a verbal agreement with them and I hope it is carried out," the Chilean said.
Last week, the 59-year-old former Villarreal and Real Madrid boss said he was leaving the Costa del Sol club at the end of the season after two and a half years at the helm.
He has been linked with a move to trophy-hungry Manchester City since the sacking of Roberto Mancini earlier this month.
"I am motivated a great deal by a project as exciting as the one at Malaga," he added.
"To be able to build up a club, this is as important as going to an institution where you will be able to win titles.
"Until things have been signed, you cannot say everything is completely done."
Pellegrini, known as 'The Engineer', has earned himself a reputation for constructing teams who play an attractive possession-based style though has been hindered by a track record in Spain that is devoid of major silverware.
He spent 16 years coaching in Chile, Ecuador and Argentina, before moving to Europe with modest Villarreal in 2004.
He led them to third place in La Liga in his debut season, when they qualified for the Champions League for the first time, and they reached the quarter-finals of the UEFA Cup.
The following season they made it to the last four of the Champions League in their debut campaign before losing 1-0 on aggregate to Arsenal.
Villarreal achieved a second-placed La Liga finish in 2008, and the following year Pellegrini was snapped up by Real.
He guided the nine-times European Cup winners to a then club record 96 points in La Liga in 2010, only to finish second to Pep Guardiola's Barcelona.
Notoriously impatient Real president Florentino Perez sacked him after one trophyless season to bring in Jose Mourinho.
In November 2010, Qatar-owned Malaga moved for him and after some hefty spending on players, the Andalusians qualified for the Champions League for the first time last season.
They fell to eventual finalists Borussia Dortmund in the quarter-finals.
After initial enthusiasm three years ago, the project at Malaga is turning sour with uncertainty about the commitment of Qatari owner Sheikh Abdullah al Thani, which was underlined by the sale of Spain full-back Nacho Monreal to Arsenal in January.
Malaga are sixth in La Liga and visit champions Barcelona in their final game on Saturday.
They are on course for a place in the Europa League next season, but they will not be able to take it up unless a UEFA ban, imposed because of delays in payments to creditors, is overturned.
