Mancini's concerns over Balotelli's attitude saw him dropped for the recent 2-1 victory at home to Tottenham Hotspur in the Premier League.
A back injury subsequently prevented him from taking part in the 5-0 demolition of Aston Villa on Saturday, and means he is doubtful for Wednesday's must-win clash with Real Madrid in the Champions League.
The decision to exclude Balotelli from the squad for the Spurs game prompted rumours the 22-year-old could be set to leave the club, but Mancini says he has no intention of showing his Italian countryman the door.
"Mario, outside the pitch, is a fantastic guy," said Mancini on Tuesday.
"Sometimes he doesn't understand which is your job, and how his job is important for his life, but I hope for him that he can understand this quickly.
"Now he is 22 but life can go quickly and I hope he can improve everything because as a player he could be like Cristiano (Ronaldo) and (Lionel) Messi, if he understands that to be like this you should work hard, your mind should be always on your job, not on the other things that are not important.
"I am very sorry for him for this. He has everything to be one of the best players in the world."
Mancini, who gave Balotelli his debut at Inter Milan, has remained loyal to the player despite a series of headline-grabbing incidents in the two and a half years since he joined the club.
The 47-year-old admits it can be trying, but continues to believe that Balotelli is capable of turning a corner.
"It is not too easy to work with him every day because if you are a manager, you should manage 22 players," said the Italian.
"This is difficult sometimes but I hope he can change his mind."
City must beat Spanish champions Madrid at the Etihad Stadium on Wednesday to stand any chance of avoiding a group-stage exit for the second year in succession.
Although Balotelli's participation is in doubt, Mancini said he would be given the opportunity to prove his fitness.
"Yesterday (Monday) he trained with the physio and tomorrow and today he will train with the team and we will see if he can play," said Mancini.
The City coach also confirmed that Gael Clichy would not be able to face Madrid after the French left-back sustained an ankle injury in the home win over Villa.
"I don't think that Gael will play tomorrow because he has a problem with his ankle," he said.
England midfielder James Milner could return from a hamstring problem but Jack Rodwell is unlikely to feature due to a similar injury, while defender Micah Richards (knee) is a long-term absentee.
Mancini conceded defeat in City's bid to reach the last 16 after the 2-2 draw at home to Ajax in their previous Group D game, but he said he was looking forward to the opportunity to tackle Jose Mourinho's side.
"Football is fantastic because when you play well against Real Madrid and Barcelona, you can win," he said.
"You can beat the best teams. It's my opinion that Real Madrid are the best team in the world, with Barcelona.
"When you play against Real Madrid, you play against 11 top players. You have to pay attention to all their players."