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Portuguese midfielder Silva, who came on as a late substitute in City's 3-1 win over Everton on Saturday, is facing an FA inquiry into the affair.
Silva posted a tweet last weekend comparing Mendy to a character in the logo for Conguitos, a brand of confectionary popular in Spain and Portugal, but deleted it an hour later.
The player has been defended by City manager Pep Guardiola but anti-racism body Kick It Out condemned Silva's actions saying racist stereotypes were never acceptable as 'banter'.
"It is a situation that no-one needs at this moment in time. It is a situation between two friends, Bernardo and Mendy, as everyone knows," Sterling, who has previously spoken out on racism issues, told Sky Sports on Saturday.
"I can see exactly the point where some people can get touchy-feely on it but I feel in that situation Bernardo made a joke to his friend.
"The most important thing for me is that he didn't refer to a colour. Everyone can see that Mendy is a black lad, we have got to be proud to be black as well," he said.
Sterling said City had handled the situation well.
"I think the club, as I always believed, handled the situation right; the sooner the FA can realise that this was no way intending to be discrimination, there is not one moment he uses a negative term to speak about his skin colour. That is the most important thing.
"He tried to make a joke and that joke wasn't the best one but we have got to move on and understand it wasn't intentional," he said.
Sterling said that Silva had been affected by the matter.
"It is really sad to see someone like Bernardo be, like the whole week, kind of down about it because he is not that way inclined.
"They are two really good friends, it is really sad to see. I can understand where the criticism has come from but I don't feel it was no way intentional of trying to be racist. Its not because its my team mates, it is just I don't see any racism in it.
"But I can exactly see the point where people have come from. Bernardo is deeply sorry about it. He is not in the wrong for me but at the same time I can see where people think it is wrong," he added.
England international Sterling said players needed to be smarter on social media.
"We understand in this day and age, anything you say and anything you do can quickly be judged and it is just a really sad situation at this moment in time," he said.
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