Pietersen, sacked by England in February 2014, was told by Graves in March that if he scored runs in county cricket he would be considered for selection again.
But, having made a career-best 355 not out for Surrey, the controversial batsman was told by newly-appointed England cricket director Andrew Strauss on Monday that he would not be recalled this summer.
"I didn’t make any promises," Graves said in an England and Wales Cricket Board statement.
"There were no guarantees that if he (Pietersen) chose to exit his IPL (Indian Premier League) contract, play county cricket and score runs he would be selected for England. And I said he should make any decision on his future on that basis."
Pietersen, 34, reacted angrily to Strauss's decision, describing the ECB's behaviour as "deceitful" earlier this week.
"In the past few days my integrity has been called into question, something I can’t accept," Graves said.
"Throughout my business career and my years at Yorkshire, integrity has been my watchword. It governs everything I do and is an important part of what I bring to the ECB.
"So it saddens me that what was a private conversation with Kevin in March has been used to do just that."
Graves said Pietersen had asked him whether he thought his England career, during which he made 8,181 runs, had ended in the right way following the 5-0 Ashes mauling in Australia.
"I agreed that nobody particularly emerged with much credit from the whole episode, particularly given his achievements for England," Graves said.
"Kevin felt he had a lot to offer and was interested in a dialogue with the ECB, sorting things out and working together.
"I can see something has been misunderstood around the conversation and in the following debate -- and perhaps how that happened."
Graves fully backed Strauss's action.
"Ahead of a big, busy summer of cricket, a clear decision needed to be taken," he said.
"Kevin was told on Monday and I completely support the decision that was taken. He may not have liked what he heard but it allowed him to look at his opportunities."
Graves said trust needed to be rebuilt.
"That takes time -- as Andrew Strauss made clear this week.
Despite everything, he (Pietersen) can work with us to re-build the relationship and make a further contribution to English cricket. It was important he knew where he stood."
(Reporting Ed Osmond, editing by Mitch Phillips and Toby Davis)
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