The Italian striker has made an impressive start to his Milan career since moving from Manchester City in January, and Allegri has laid down the gauntlet for the forward to become one of the planet's outstanding players.
"Mario Balotelli is a 22-year-old and he has potential that even he doesn't know about yet," Allegri told reporters.
"His objective should be to become one of the top five players in the world."
However, Allegri does not believe that Balotelli can achieve feats similar to Barcelona's Lionel Messi, with the Italian boss admitting that the Argentina forward's goalscoring talents put him in a class of his own.
"There's only one player who scores 40 to 50 goals a season and he plays for Barcelona, [but] the forwards are all scoring well and we hope the defenders can add to that tally as well," he said.
Milan face Fiorentina on Sunday afternoon in Serie A.