The former Hoops hitman, speaking exclusively to Football Insider, insists the attacker has a vital role to play this season.
Forrest, 30, made his fourth Premiership appearance of the season on Sunday as Celtic beat Dundee 4-2.
He replaced Liel Abada in the 62nd minute as the Hoops stayed within touching distance of Rangers.
Forrest has only made 10 total appearances this season after picking up an injury in August.
Despite this lack of game time, McAvennie insists the winger can be an important player for Ange Postecoglou.
“We need players like Jamesy Forrest back,” McAvennie told Football Insider correspondent Ben Wild.
“I look at players like Jota and Kyogo, I don’t want them to be playing 90 minutes if they don’t have to.
“We have so many games to play this season and we have a much better chance of winning it with them playing.
“We need the game to be won why the 65 or 70-minute mark. With most Premiership games you would expect that to be the case.
“But you don’t want to replace them with any old rubbish. You need quality options.
“Forrest is one of those options and he looks like he’s getting his fitness back.
“I think he’s a little bit underrated by the fans actually, he’s better than you think.
“We have plenty of depth on the wings, I’m actually pretty happy with that.”
Forrest will have the international break to fully regain his fitness after failing to make Steve Clarke’s latest Scotland squad.
The Hoops face St Johnstone when the league season resumes.