The Bafana Bafana midfielder passed up the offer of a new contract at Selhurst Park in favour of a drop in divisions with City, who were relegated from the Premier League in the 2013/14 season.
Dikgacoi was a key player for Palace last season as they shrugged off a horror start to ease to safety, but Pulis says the offer was too good for the 29-year-old to turn down.
“He is one of those players in the right situation can certainly do the job,” Pulis is quoted by the BBC. “I'm disappointed, but can understand that [it’s] a long contract and a very well paid contract.
“Cardiff have made him a fantastic offer. There’s obviously tremendous potential there and he’ll be desperate to get back into the Premiership.
“Physically he’s a powerhouse and he’s got all the attributes to do very well for them. If they get him fit and keep him fit he'll be a good player.”
Dikgacoi signed a three-year contract with the Bluebirds and will now link up with former Manchester United striker Ole Gunnar Solskjaer, who took over as manager at the start of the year.