According to a report in La Gazzetta dello Sport, Prandelli will step down as Italy's head coach at the end of the 2014 World Cup in Brazil.
Lippi, who coached Italy in two different stints and led them to the 2006 World Cup title, is now in charge of Chinese Super League side Guangzhou Evergrande.
Milan coach Massimiliano Allegri, Japan boss Alberto Zaccheroni and Zenit manager Luciano Spalletti have all been linked to the Italy job.
Lippi believes Prandelli may want to build a team at club level and said several sides would jump at the chance of having the 56-year-old in charge.
"I've read the rumours," Lippi told Sky Sport Italia.
"It's quite a cast. I understand the desire of Prandelli though.
"He is 10 years younger than me, and therefore has the desire to build a team, working with it every day.
"After four excellent years, let's hope that they get the best possible result at the World Cup.
"And I think why not? Italy, France, Holland, Germany, Brazil and Argentina are the teams that will probably win. And with a bit of luck who knows?
"However, Prandelli will have no trouble finding a team."
