The emerging midfielder has been thriving in a No. 10 role since making his full Premier League debut last month.
Grealish, 19, struggled to keep himself in former boss Paul Lambert’s plans following a promising start to the season, spending the last few months of the Scot’s tenure either warming the bench or with the Under-21s.
However, the Solihull-native has proved a revelation of late under Sherwood’s stewardship, earning rave review during a run of seven straight starts, which has seen him help the club secure both Premier League survival and a place in the FA Cup final.
While he was touted as a winger before Sherwood’s arrival, the teenage midfielder has been used as a No. 10 since being handed his full top-flight debut in last month’s 3-3 home draw with Queens Park Rangers, and that is where the new manager wants to keep him for the foreseeable future.
Arguing that Grealish needs to be used in a role where he has the best chance of influencing the game, Sherwood said: "Jack has given us another dimension. It took a while to assess what he actually did because when I came in he was playing out wide and out of the game.
"I don't think he will ever be a wide player, if I'm perfectly honest. You have to keep someone of that talent in the game.
"I see him in the centre of the pitch and running at people. That's where he will continue."
Grealish also took home Villa’s Young Player of the Season award this week, earning a substantial 81 per cent of the votes to beat defender Jores Okore to the accolade, and Sherwood believes voters made the right choice.
“Jack deserves it. He's done very well,” he added. "He's had a lot of pressure on him but he's not been fazed. He goes out and does his job.
"He loves the game. He's a friend of the football. We're very glad to have Jack here. He's at the start of his career and we're hoping he will be a massive player for this football club."