Panesar sparkled at Old Trafford and justified the hype around him by scything the Pakistan top order, claiming five frontline batsmen as England won the Test.
Reacting to Panesar's performance, Giles told BBC Five Live, ''Monty in this last game performed superbly and he's now the man in possession.
''I have to get my place back. That's the danger when you get injured,'' he added.
He, however, was generous in his praise for Panesar, the first Sikh to play for England.
''Monty is a brilliant technician. He works extremely hard, he has lovely drift on the ball, puts lots of revolutions on it and turns the ball.
''His consistency is something that has impressed me since he has come into the team,'' Giles said.
Recuperating after a hip surgery, Giles, however, is not rushing his comeback to the national side and said his immediate goal was to bowl ''in any form of cricket''.
''I can't bowl and I can't run. The actual process of rehab is going really well but it's just another four weeks before I reach that point,'' said the veteran of 52 Tests, who has missed competitive cricket this calendar year.
After the Pakistan tour early in November, Giles underwent a hip operation but that didn't clear up his injury so he had another in July.
The left-arm spinner, however, is optimistic of making to to the Ashes and has his eye set on the ICC Champions Trophy in India in October.