Real insisted Mbappe could not take part after playing in the Euros earlier this summer.
Pires told Marca: "If he's disappointed... how can I tell you. I don't know, it's difficult to answer this question.
"I know that he wanted to play because it is a dream for many to play the Olympic Games, especially because he is in France, in Paris, in his city...
"He knows the people here well, but I think that in the end the one in charge is Madrid. The one in charge is Florentino Pérez. I think we have to respect the president's word. What it means is that now Mbappé is more important for Madrid than for the French team and to play in the Olympic Games.
"I wanted to see him play with Thierry Henry as coach. But, as always, we must respect Madrid's word."
World Cup winner Pires also said: "I am very happy that Mbappé has signed for Madrid . We all know that it is the biggest club in the world, that it is a club that knows what it means to win titles, whether LaLiga or the Champions League. More and more great players They are going to play there because everyone wants to sign for the white team.
"For Kylian it is a great opportunity to reach another level. He has played for Monaco, for PSG, for the French team, but Madrid is another level. Let's see what he achieves with the white shirt, I hope he does very well and wins many titles."