Mahrez has featured in 18 of City’s 22 games this season, scoring seven goals and assisting seven more for his teammates.
The Algerian bagged a brace last weekend against Aston Villa, but his manager believes it is because he is playing regularly that is the key to his current form.
“Yeah (he is playing well), especially because he plays regularly,” said Pep.
“The players need it; everybody needs rhythm and now he’s playing quite often.
“In front of goal he is clinical and when he gets the ball I feel he is going to score a goal. It’s a nice feeling for him, too.”
The Catalan also revealed his players’ flexibility has been behind some f the recent tactical tweaks, saying he trusts them to take on different roles when the situation demands it.
“We play Gabriel in the left; he is more a striker. We change a bit when we have to and that is the real quality of my players,” he said.
“For example with Raheem, Sergio and Gabriel, we have a lot of players in the box.
“When they don't play this way and we play David or Kevin in there and we have less players in the box, but more control or passes.”
Pep also reiterated that he will definitely be in charge next season, adding: “I say many times, unless the Club sack me, I’m going to stay 100%.
“For sure, 100% I’m going to stay here next season.
“Not because we won the last two games or playing better the last few months.
“I enjoy working with them and I like it, but even if it’s going bad and we are not in the Champions League, I will not leave.
“As a manager there are good and bad moments, you don't win all the time. But it’s all about what we can do next and how we can improve.”