Alleyne was named in Gracia's side due to face Hull City on Sunday, before his loan spell was ended by the Premier League giants on Monday after Ruben Dias and Josko Gvardiol picked up injuries.
The 20-year-old was then thrust straight into City's XI, impressing in the 1-1 draw against Brighton at the Etihad Stadium.
Alleyne had excelled for the Hornets in recent weeks, starting their last six matches as they took 14 points and kept three clean sheets.
Max Alleyne (right) alongside Mattie PollockMax Alleyne (right) alongside Mattie Pollock (Image: Alan Cozzi/Watford FC)
Guardiola praised his development at Vicarage Road pre-match and namechecked the two head coaches who have facilitated it afterwards.
He said: "Max arrived the day before yesterday for his first training - of course he was here in the past one or two years training a lot.
"I want to be grateful to Watford and say thank you to [Paulo] Pezzolano and Javi Gracia, because I'm pretty sure they've helped him a lot to grow up as a football player.
"He had a few defensive issues previously but today, one-on-one, he was fast in the transition and on the ball he was really, really exceptional.
"Really, really top. Unfortunately we couldn't deliver the victory on his Premier League debut but he will have many in the future."
Max Alleyne vs Brighton pic.twitter.com/JjS3L2qx90
— OB (@ofbmar) January 8, 2026
With neither Gvardiol nor Dias back imminently, Alleyne could be set for a lengthy run in the City team.
Earlier this week, the defender posted his own statement of thanks to to Watford on Instagram.
He said: "I have really enjoyed my time at Watford. I’ve had the privilege of working with some amazing players and staff who have helped me massively.
"The supporters were amazing to me and I’ll always remember my time at this great club.
"I wish everyone at the club all the best for the future. Thank you Hornets."