The former Bayern Munich and Inter Milan man was impressed with the performance of the 20-year-old for England against Germany in a friendly international match back in March.
The former Milton Keynes Dons star started the game in Berlin and put in a brilliant performance, as the Three Lions won 3-2.
Matthaus has praised Alli, but he has suggested that the Tottenham youngster needs to work on his temperament.
“I watched him in that game against Germany in Berlin and I could see, straight away, he is a great player,” Matthaus wrote in The Sun about Alli. “He seems instinctively to get into the right position, knows what he has to do with the ball, when and where to give it, so I’m sure he will not be nervous.
“If you can do what he has done, play so well in the Premier League, coping with the pressure of big games against Arsenal, City and United, you can take that to the national team as well.
“The only question over him is his temperament. He missed the last three games of the season because of suspension and he cannot afford to make a mistake like that in the Euros.”
Alli is one of the most talented and most exciting players in the Premier League. The Tottenham midfielder will be a key player for England at the Euro 2016 finals in France this month.
The Three Lions are expected to reach the quarter-finals at least, and Alli will have to be on top of his game to be successful in their quest and must not pick up suspensions.
Alli scored 10 goals and created 55 chances in 33 Premier League appearances for Tottenham this past season.
The youngster had a pass accuracy of 76% and a shot accuracy of 60%, and won 36 headers, 30 dribbles and 53 tackles.