Sanchez scored 54 goals in 111 league appearances for Atletico between 1981 and 1985 before joining crosstown rivals Real Madrid.
"For me, Falcao is as good as Hugo Sanchez, or even better," Simeone is quoted as saying in AS. "While Hugo was very much Hugo, Falcao has the great virtue of trying to come out better in every match compared to the previous one.
"He has voracity and an intuition in the area that I've only seen in Hugo Sanchez. As a finisher he's like Hugo, but he's even more complete.
"I've known Radamel since his time at River Plate, and I'm sure that he'll keep on growing, that he'll become a world number one. I have complete faith in him."
Falcao joined Atletico from Portuguese giants Porto in the summer of 2011 and helped them win the Europa League last season.