Prandelli, who quit as Italy's coach after the FIFA World Cup, said Balotelli must "come back to reality" to fulfil his potential, while he slammed Rossi's reaction to missing out on a spot in the Italian squad for Brazil 2014.
Throughout his four-year tenure with Italy, Prandelli was a regular apologist for Balotelli, giving the tempestuous forward his senior international debut in his first match in charge.
Balotelli has scored 13 goals in 33 matches for Italy but was generally ineffective in Brazil, scoring just one goal in three games as Prandelli's side were eliminated in the group stage.
Despite having won four league titles in his career - three with Inter and one with Manchester City - Balotelli is widely considered a talent unfulfilled, a view Prandelli shares.
"Balotelli is not a champion, he is only a player who has the chances to become one," Prandelli said at his first media conference as Galatasaray coach.
"I had told Mario that if he wants to become the type of player he thinks he is, then he needs to come back to reality. If he came back down to Earth, then he could be an actual champion and not just a player who has the ability to be one."
Balotelli was Prandelli's lead striker in Brazil with the latter having also picked Ciro Immobile, Antonio Cassano, Alessio Cerci and Lorenzo Insigne as the forwards in his squad.
Prandelli left Fiorentina striker Rossi behind after claiming the 27-year-old was still not fit enough, after injuring the medial collateral ligament in his right knee in January.
Rossi played four games for Fiorentina in all competitions before the end of last season, scoring two goals, but was culled from Italy's preliminary squad when Prandelli made his final selection and the player took to Twitter to voice his frustration and dismiss claims he was unfit.
Prandelli claimed Rossi's reaction was unacceptable.
"Rossi is my biggest personal disappointment," the former Fiorentina coach said.
"His reaction to his exclusion after I had told him twice that he was not ready for the World Cup wasn't called for. I think one day he will tell the truth."
Rossi returned to training with Fiorentina on Tuesday but stayed calm when responding to Prandelli's comments.
"I take note of his words but I choose not to comment, not to answer," the striker said.
"That said there is a limit to everything, if this situation were to continue, then later we could have our say."
