Speaking at a by-election event in Gulladuff, Co Londonderry, Mr McGuinness said the council vote restricting the flying of the Union flag at the landmark building was the "right decision".
He said the vote had been "miscast" as a victory for nationalists and Sinn Féin.
"Belfast City Council's decision last week was a vote for compromise," he said. "Compromise favours no side but benefits us all."
He added: "Belfast city is a mirror of the process of change which has been shaping our wider society. It is a changed city from 10, 20, or 50 years ago. Its ethos has changed, its demography has changed, its politics has changed and it continues to change."
Demonstrations have been held every day since Belfast City Council passed the Alliance motion earlier this month, with sporadic violence breaking out across the city.
At the height of the trouble, an attempt was made to murder two police officers as they guarded East Belfast MP Naomi Long's offices, while other Alliance politicians and properties came under attack.
Separate death threats have also been made against Ms Long, Sinn Féin MLA Gerry Kelly, DUP MP Jeffrey Donaldson, Health Minister Edwin Poots, and now First Minister Peter Robinson.
I am very disappointed that, in response to the events of the past week, we have yet to see from within some sections of unionism the honest leadership we require. I am disappointed to say that we have seen a failure of leadership from some quarters. Only they can explain why.
Unionist leaders have condemned the violent outbreaks, with the DUP leader and UUP leader Mike Nesbitt calling for protests to remain peaceful.
On Wednesday evening, Mr Robinson and Mr Nesbitt confirmed that they had met for further talks on the issue of flags and the subsequent disorder.
They said the meeting was part of a wider process of consultation and engagement on a longer-term strategic approach on "how we can move beyond protests".
Mr McGuinnes said: "The protests and the attacks on the police, the City Hall staff, the Alliance party and their family members, and on business were a disgrace and must be condemned. So too must we condemn the threats, from whatever source, against members of various political parties, including my own and the DUP. I call for all of this to end.
"Belfast deserves better than this. We all deserve better than this."
The deputy First Minister said the response to the vote has been "orchestrated in a very cynical way".
"Both the UVF and UDA have played a significant role in this orchestration. Unionist leaders, for some reason or other, may now pretend otherwise," he said.
"We have yet to hear a unionist leader question the role of loyalist paramilitaries in all of this. And at this point, we can only speculate as to why that is so, or how far this orchestration extended and who all it has involved.
"Those responsible for this should now be told by unionist leaders to bring it to an end."
Mr McGuinness also said attempts to convene a meeting of the Assembly Commission to consider changing the number of flag-flying days at Stormont was a "clear intent" to "impose a unionist position rather than to seek an agreed position"- as it is not subject to cross-community voting.
The Sinn Féin politician made the speech as he announced his nominee to contest his Westminster seat after he stepped down to focus on his role as deputy First Minister.
Mr McGuinness was first elected as MP for Mid Ulster in 1997.
Mid Ulster MLA Francie Molloy has been selected by Sinn Féin to contest the by-election.