Pietersen was sacked by the England and Wales Cricket Board (ECB) following a series of disputes between him and the team and has not played for the national team in over a year.
But he has expressed a desire to play for England repeatedly and opted to play for county side Surrey instead of Indian Premier League (IPL) outfit Sunrisers Hyderabad to prove his commitment to the team.
"England have got to make a clean break and look forward to the future," Waugh was quoted as saying by miror.co.uk on Sunday.
"Sometimes you have to have short-term pain to get the long-term gain. I don't think he's a great player right now."
"Setting aside all the other things, I don't think his form warranted a spot in the England side. He may have been a great player but I wouldn't class him as one now," he added.
Pietersen has scored 8,181 runs at an average of 47.28 with 23 centuries in Tests, making him one of England's greatest-ever batsmen. But Waugh thinks he does not deserve a place in the current XI.
"First, he has to be one of the best six batsmen in the country, which he's not. Then is he right for the current set-up? Does he fit in how the team is moving forward? Can he work with the captain and other players? Obviously there have been some issues. That's part of the reason why he's not there now," the batting legend said.
He said he believes Pietersen cannot transform his personality and suit the demands of the team since he is too self-centred.
"Unless he's changed as a person and a personality - and that's hard to do - I don't know how you go back to what happened before.
"The number one thing is you've got to respect each other. Once this stops you're in real trouble. And I think that's probably happened over the past couple of years," he opined.