A new Formula One season begins this week with the Australian Grand Prix in Melbourne.
Victory for Hamilton in the 2020 drivers' championship would see him draw level with Ferrari great Schumacher on seven titles.
Rosberg and Hamilton were team-mates at Mercedes for four seasons and became bitter rivals by the end of their time together, with the German retiring after winning the 2016 world title.
Mercedes have won six consecutive driver and constructor doubles, with Rosberg feeling Hamilton is at the peak of his powers going into a campaign where he can make history.
"He's the favorite going into the season, definitely, because he's unbeaten for many years now and he has such an amazing team," Rosberg, Heineken's 'When You Drive, Never Drink' ambassador, told Stats Perform.
"He's driving so well, so consistent. For the last couple of years now it's been the best Lewis Hamilton I think that he has ever been, so it's really impressive and it's going to be hard for anybody to beat him."
As well as equalling Schumacher's mark of world titles, Hamilton is within seven of Schumacher's 91 grand prix wins.
Rosberg added: "Unbelievable, even to think of that is just nuts.
"He has a chance to become the greatest of all time this year, to equal Schumacher and to maybe beat him on the race wins, that would make him the greatest of all time statistically. So it's absolutely incredible, impressive."
This season will be the last under the current regulations and Rosberg is hopeful the 2021 changes being brought in by the FIA, with former Mercedes team principal Ross Brawn playing a key role, will make F1 a better product in the future.
"Ross Brawn did the new regulations, technically, and he is the greatest technical genius we've ever had in our sport - he's done such a great job with his team," added Rosberg.
"So I'm convinced the sport is going to take another step forward. It can just become even more awesome, even more entertaining, more unpredictable, more overtaking.
"That's what we all want to see and I'm certain they are going in the right direction so it's going to be wonderful to watch that unfold."
Rosberg was speaking following the launch of Heineken's 'When You Drive, Never Drink' campaign, for which he has starred in a TV commercial alongside his father, fellow F1 world champion Keke Rosberg.