Villas-Boas believes Roberto Mancini's side, who finished third last term, will be a serious threat this campaign.
"I think it's pretty clear that they are building a squad to fight for the title," the 33-year-old said ahead of Chelsea's clash with Aston Villa in the final of the Barclays Asia Trophy on Saturday night.
"It's for Mancini to say what his objectives are but my personal perspective is that they are making good signings and that they can threaten for the league."
The former Porto coach feels the 2011-12 title race could be the closest yet.
"I think Manchester United as the title holders will be a reference for everybody but you can see the amount of activity Manchester City have had in the market. It's pretty clear they have a title objective as well."