Ranger splay host to Celtic at Ibrox on Sunday afternoon.
The Gers play host to Celtic at Ibrox with six points separating the two sides, though Brendan Rodgers' men do have a game in hand over the Light Blues following the postponement of their match against Dundee last week.
However, Rangers come into the game in excellent form under the guidance of Graeme Murty, winning nine of their last 10 outings and six on the trot including a comfortable 4-1 win over Falkirk last Sunday in the Scottish Cup.
Souness, who played for the Gers for five years as a player manager, claimed that Rangers closing the gap on Celtic is only a good thing for Scottish football and and is desperate to see his old side sink the Hoops.
"Yeah I think it is the most important Old Firm game in recent years. Rangers are a wee bit close and that’s good for Scottish football, it’s certainly good for Rangers," Souness said.
"Celtic are in front, I think they’ve never been closer to them but this weekend will tell us a great deal. Obviously as an ex-Rangers man, I want that to happen.
"I’ve been involved in some big derbies. Liverpool-Everton, Liverpool-Man U, Fenerbahce-Galatasaray, but this is the biggest one. For Rangers and Celtic fans, you don’t become one, you’re born one."
Rangers will be without midfield duo Ryan Jack and Graham Dorrans, but Celtic are without the likes of Craig Gordon, Dedryck Boyata, Mikael Lustig, Stuart Armstrong, Paddy Roberts, Jonny Hayes and Leigh Griffiths are all sidelined.
The Gers will be confident going into the match, but not only because of their recent form but because Graeme Murty is yet to suffer defeat to Rangers' Glasgow rivals Celtic, drawing 1-1 and 0-0 in his two matches as boss.