Larger blocks leads to more users and more use cases — which can also lead to greater decentralization.
Originally everyone was a miner — 100% decentralization — but there weren’t that many total users. Then bitcoin acquired real value, mining became hard and pools were required. There weren’t many pools initially, and relatively few miners. Decentralization reached a temporary low. Since then, as bitcoins value and userbase has risen, so has the number of pools and the absolute number of miners.