"It was no great shock to see Kevin Pietersen left out of the squad for the India Test series after his much-publicised issues with the England and Wales Cricket Board," Stewart told 'BBC Sport'.
"He was dropped in August for sending "provocative" text messages to South Africa players and I understand that right up until Monday night both parties were trying to resolve the problems, but the fact that Kevin has not been selected confirms there is still work to be done," he added.
Pietersen has had a thorny relationship with both his fellow players as well as the Board and this has affected his fortunes despite being a prolific scorer. He recently retired from limited-overs cricket.
"I know Kevin is desperate to get back playing again for England and I just hope that the issues that have arisen are eventually cleared up so that England are then able to pick their very best players for all forms of the game," said Stewart.
The former wicketkeeper-batsman said once the off-field issues are resolved, it won't be tough for Pietersen to adjust back in the dressing room.
"Once the healing process has taken place, I would hope KP will be accepted back into the dressing room and any anti-KP factions within the team have been broken up.
"Player power in any dressing room must never be allowed to rule and must be quashed by the true leaders - the coach and captain," he said.
"We all know that the loss of Pietersen weakens the England team alarmingly but his absence, as well as that of former captain Andrew Strauss, has given opportunities to a couple of uncapped players with plenty of potential," he added.
