Lampard believes Sanchez has made the right call as he is signing for one of the "biggest clubs in the world."
The 22-year-old remains keen on a move to England and Arsene Wenger is still in the market for a young attacker despite the impending arrival of Henrikh Mkhitaryan.
"It is not as if he's turned down City to go to China, like other players," Lampard told BT Sport.
"He's gone to one of the biggest, if not the biggest club in the world in Manchester United.
"If you look at it the other way, of course there's money involved, but it's more of a challenge. Here at Manchester United there's no doubt that they need an uplift - they're 12 points behind. He could be that man."