"Dhoni is a fantastic player and I believe he is the best person to lead the Indian team," Laxman said at the launch of ESPNcricinfo's new book 'Talking Cricket' here.
Laxman also sought to clear the air about the controversy that took place last year when Dhoni was not among the invitees during a dinner function at the former's residence here.
"I never knew that a dinner at my place would become a topic of national discussion. It was really disturbing to read the report in the media about that event," he said.
The Hyderabadi stylish re-iterated that the timing of his retirement -- in August last year -- was perfect.
"Initially, my aim was to beat Australia in Australia and then retire, but unfortunately we had a very poor series. But the matter (retirement) was at the back of my mind for around six months. I could have easily played against England and Australia but I thought it would be better to give a youngster a chance to play 10 Tests at home before India's South Africa tour.
"The toughest day after taking the decision to retire was the very next day. As I woke up I told my wife I have taken a brilliant decision," he said.
Laxman stressed the need for youngsters to take Test cricket seriously. At the same time, he termed IPL as the best form of cricket entertainment.
"There has to be a balance and youngsters should understand that money is the byproduct of your hard work and good performance you put in for your country. There is no bigger prize than representing your country.
"At same time, T20 requires a special set of skills. And I could have never imagined someone like A B de Villiers reverse-sweep a fast bowler for six over third man. In my entire career I could have never imagined of playing that shot," said Laxman.