The 30-year-old has enjoyed a resurgence at Upton Park in recent weeks after being allowed to move into more central positions for the Hammers.
Downing's impact on the team continued on Saturday when he set up Morgan Amalfitano for West Ham's third goal in their 3-1 win over Liverpool, and Allardyce believes that the former England international is enjoying his new role.
"Stewart's been outstanding this season," he told the club's official website. "Playing him in the middle has really worked. His talent is clear for everyone to see. The ball for Amalfitano's goal was superb. He gets more touches in the centre, I'm sure he's enjoying it."
West Ham return to Premier League action this Saturday when they face Manchester United at Old Trafford.