Know that the life of this world is but amusement and diversion and adornment and boasting to one another and competition in increase of wealth and children - like the example of a rain whose [resulting] plant growth pleases the tillers; then it dries and you see it turned yellow; then it becomes [scattered] debris. And in the Hereafter is severe punishment and forgiveness from Allah and approval. And what is the worldly life except the enjoyment of delusion.(Qur'an 57:20)
Volume 3, Book 48, Number 830 :
Narrated by Abu Bakra
A man praised another man in front of the Prophet . The Prophet said to him, "Woe to you, you have cut off your companion's neck, you have cut off your companion's neck," repeating it several times and then added, "Whoever amongst you has to praise his brother should say, 'I think that he is so and so, and Allah knows exactly the truth, and I do not confirm anybody's good conduct before Allah, but I think him so and so,' if he really knows what he says about him."
At the first place, praising another person by the Prophet (peace be upon him) is not encountered in any hadith(as far as I've come across). So, it is highly advisable not to praise other people.
But, as did the above verse state the natural tendency of man, and neither did the above hadith forbid to praise, so, it's not forbidden. But in fact it is suggested to put on their opinion only if at all they like a person or his deed, rather than praising explicitly.
Even in terms of psychology, the person who is praised gets high and sometimes kinda feels "I'm the best" and it is bad for him.
Do not think those who rejoice for what they have done and love that they should be praised for what they have not done-- so do by no means think them to be safe from the chastisement, and they shall have a painful chastisement. 3:188
That is why this Du'a is recommended for those who are praised
This supplication was not taught to us by the Prophet (sal Allahu alayhi wa sallam), but it is one that his best friend, Abu Bakr (radi Allahu anhu) would make after being praised (some narrations state that it was a duaa of Ali radi Allahu anhu).
It is reported that he would say,
O Allah, make me better than what they think of me, and forgive me for what they do not know about me, and do not take me to account for what they say about me.
And to Allah belongs the dominion of the heavens and the earth, and Allah has power over all things. (Qur'an 3:189)
So all the praises and thanks are to Allah, the Lord of the heavens and the Lord of the earth, and the Lord of the 'Aalamin (mankind, jinns and all that exists).
May the creator guide us all.
Support: The Supplication Series: Being Praised