Veteran striker Forlan, now playing for Penarol in his native Uruguay, represented Atletico between 2007 and 2011 in a prolific spell before joining Inter.
Simeone took over as head coach at the Vicente Calderon in December 2011 and collected the Europa League and UEFA Super Cup during his first nine months at the helm.
The ex-Atleti, Inter and Lazio midfielder built impressively on that initial success, securing the 2012-13 Copa del Rey before a memorable final-day Liga title triumph in 2013-14.
Atletico lost 1-0 at Malaga on Sunday, passing up the chance to top La Liga at Christmas this time around, but Forlan believes they remain firm contenders for Spain's top honour thanks to their coach.
"[Atletico are] spectacular, I think it's a growing club," he told Omnisport. "I think you really should highlight Simeone's work.
"He's been there four or five campaigns. That's really important in that club that have had a lot of trainers and today especially, where a coach goes from one club to the other, it's hard to keep a team that long and at that level. I think it's spectacular."
Asked whether Atletico can prove themselves as realistic contenders to Barcelona's crown, Forlan added: "They're already doing that. I believe that.
"As a team, with all the players, he has a really good team. If you compare it to Barcelona or Real Madrid, it's obvious they have the choice of buying more expensive players. They have other economic opportunities.
"But Atletico have also improved their choices compared to when I was there. That allows them to get even a little bit more.
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