Gracie took it so far as to say Palhares has the mentality of a minor since the Brazilian grew up poor and uneducated.
Gracie wasn't taking a shot at Palhares, as he meant it in a loving, positive way.
"He doesn't know how things work in the real world," said the trainer. "He has the mentality of a 12-year-old. You can't treat him like he's a grownup. I know everybody's going to say, 'Oh, he has to be a professional.' But he needs guidance.
"I will sit down with him and have a chat, five minutes, And say what? I will explain to him that to be great, you don't need to hurt people. We learn to grapple in order to dominate our opponent, but if we're superior, we're kind. That shows real greatness, you know? Not to hurt or humiliate your opponent. 'Toquinho' doesn't know the difference yet. I will help him understand. Either you learn from your elders, or you're going to learn by life whipping you."
Gracie is bringing Palhares to the second-annual World Jiu-Jitsu Expo, which takes place Nov. 9 and 10 in Long Beach, Calif.
Among the MMA fighters who'll be competing alongside them in pay-per-view superfights will be Jon Fitch and Jake Shields.
"I love the guy," said Gracie, who serves as president of the World Jiu-Jitsu Expo. "You can't find a nicer person. People say I'm a nice guy, but 'Toquinho' is 10 times nicer than me. I don't see him having the intention to hurt people."
Palhares was booted out of the UFC for holding into a submission attempt for too long, and Bellator CEO Bjorn Rebney said he has no interest in signing him.
As for the World Series of Fighting, their CEO said "He needs to seek some sort of help or talk to somebody, a psychiatrist or whatever that would help him get away from hurting fighters."
Palhares finally admitted that he held onto the submission too long.
"No, I did not want to hurt him," Palhares said. "In the heat of the fight, I did not feel him tap and afterwards, when I watched the fight, I realized that I held on too long, but I really did not mean to hurt him.
"I think it has a lot to do with my style, I am really aggressive when I go after submissions. There have been times where I do not hold on and people get out and then I lose the fight. I am the way I fight. I'm getting better and been working a lot on this, but, this is my style."