Ronaldo's return to United in August 2021 failed to live up to expectations with the Portuguese leaving in acrimonious circumstances and joining Al Nassri in Saudi Arabia a little over a year later.
"It was a decision that was very difficult to turn down and I felt we had to take it, but it turned out wrong," Solskjaer said in an interview with The Athletic. "It felt so right when he signed and the fans felt that at that Newcastle game, when Old Trafford was rocking [after Ronaldo scored twice in a 4-1 win].
"He was still one of the best goalscorers in the world, he was looking strong."
The Norwegian said he sympathises with current incumbent Erik ten Hag who is under pressure after a poor start to the season.
United have lost three of their opening five Premier League games and face Bayern Munich later on Wednesday in a daunting start to their Champions League campaign.
Solskjaer, who was sacked in November 2021 after just under three years in charge amid a run of poor results, said managing the Old Trafford club is especially challenging given that comparisons are automatically made with Alex Ferguson's trophy-laden reign.
"I know what he's going through. It's a dream job, but it's difficult," Solskjaer said.
"You're dealing with humans with all their problems and backgrounds -- this isn't a computer simulation. But most [players] are good professionals who want to do well. Some think about number one first, most think of the club."
Solskjaer said United now struggle to sign the kind of players that once would have needed little persuasion to join, saying the club have missed out on key targets such as Jude Bellingham, Harry Kane and Declan Rice.
"The expectations are very high but we can't live in the same era as when I played," he said. "We had Arsenal and Chelsea as rivals towards the end. Now, most teams have money or even if they don't, they don't need to sell.
"Back then, Wayne [Rooney] and Cristiano were the best young players and we signed them. Now, United can't just go and buy [Brighton striker] Evan Ferguson.
"We couldn't buy the players I mentioned to the club. We wanted Jude Bellingham badly -- he's a Man United [type of] player, but I respect he chose Dortmund. That was probably sensible.
"I would have signed Kane every day of the week and my understanding was that he wanted to come. But the club didn't have the budget with the financial constraints from COVID-19, there was no bottomless pit."
Solskjaer never won a trophy as a coach at United, the closest being the 2021 Europa League final when they lost to Villarreal on penalties. His reign ended after a 4-1 drubbing at Watford nearly two years ago -- a performance Solskjaer said he knew would result in him losing his job.
"Nobody told me, but I knew at half-time against Watford," he said. "We didn't look like a Man United team; the players weren't running for each other. At halftime, I told the players it was probably going to be the last time we worked together and to play with pride.
"We almost turned it around, until Harry Maguire got sent off."
Reuters contributed to this report.