"He was wobbling and wasn't sure about going to London," added Bruce. "We had offered him a contract and he was on the verge of signing that contract.
"Then Manchester City ring him and it's a different ball game. They have shown a lack of respect for this football club and the player himself."
City have rejected Bruce's claims that they behaved improperly.
A club statement said: "Whilst Manchester City FC has the utmost respect for Steve Bruce and his views, the club wishes to make it absolutely clear that the only inquiry made in relation to Wilson Palacios was by a private phone call to [Wigan chief executive] Brenda Spencer.
"The call was made to establish the potential availability of the player. No figures were discussed or any bids made."
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