Rooney, 30, made his 116th appearance for England in Sunday's World Cup qualifying victory over Slovakia.
"I don't think he's a striker anymore," said Shilton, who won 125 caps. "We are trying to fit him in, but he's not a midfield player for me. Never will be."
Speaking to BBC Scotland, Shilton, 66, added: "He is spraying a few balls around, but I don't think he's being very effective.
"I thought he should have retired after the Euros. It's not because he could break my record. Far from it. If he does and he plays well, fine."