Dallaglio's comments appear to support the England coach's view that blindside flanker is not Farrell's best position, and adds further weight to the growing belief that he should be playing at inside centre instead.
"It strikes me that he's far too skilful to play in the back row," said former England captain Dallaglio.
"He a very good ball player who has been used to playing second receiver for most of his career so it would seem to be his role.
"It doesn't take a rocket scientist to realise that the quality we have in the back row in this country already and compare that to the quality we have at 12 means it would be easier to make your mark at 12."
Farrell missed the whole of last season through injury, and has played only 80 minutes of rugby for Saracens in their current campaign.
With the World Cup less than a year away, time is not on the 31-year-old's side when it comes to gaining international recognition.
Dallaglio believes there is too much pressure being placed on Farrell's shoulders, and that patience will be the key to him realising his potential.
"There's unnecessary pressure being heaped on Andy Farrell," said Dallaglio.
"Clearly he's a wonderfully talented professional and I think he'll do very well, but like anyone who comes into the game he's going to need time.
"I can't imagine what it would be like for me to move across to rugby league and from day one be in the Great Britain squad. It would be incredibly difficult.
"He just needs to get some rugby under his belt and then he can start enjoying it and take the next step, which is England."
Dallaglio makes his first start of the season on Sunday in Wasps' EDF Energy Cup clash with London Irish at Adams Park.
The talismanic 33-year-old has recovered from having a plate removed from his ankle and will be part of a Wasps team that also sees England prop Phil Vickery make his debut for the club after moving from Gloucester in the summer.
Dallaglio cannot wait to finally get his season up and running.
"I'm very ready, very excited, and very nervous - which is a good thing - and I'm looking forward to getting the season under way," he said.
"It was important that we got things right on the rehab front and I feel very different now I've had the plate removed and I'm really looking forward to seeing where I'm at.
"I've trimmed down, lost a bit of weight, and the ankle feels a lot more stable and a lot stronger.
"I'm not the first player to come back from a fracture dislocation, as Alan Smith has proved at Manchester United."
Sunday will also be a special day for Vickery, who plays his first game of rugby since January after undergoing neck surgery.
The 30-year-old admitted there were times when he wondered if he would ever take the field again.
"I'd be lying if I said there weren't certain times when I thought it might not be possible," said Vickery.
"I questioned if it was all worth it, but it puts life in perspective and makes you analyse exactly what you want.
"Moving away from home has brought my family a lot closer and from day one at Wasps everyone has made me feel incredibly welcome.
"I just can't wait to get out this weekend and prove to myself and other people that I can still do it. I feel as good as I've ever felt."
Vickery, who has had three operations in the past two years, is not thinking about England's autumn international series, preferring instead to focus on doing his job for his new club.
"Thinking about England right now would be disrespectful to everyone at London Wasps and it would be disrespectful to those players involved with England," he said.
"I've got to get some match fitness and see how it goes. This weekend is going to be a huge step."