Sterling scored 25 goals last season and has already has six to his name this term.
Xavi worked under Guardiola at Barcelona and knows his methods inside and out, and he says the Spaniard's close guidance has benefited Sterling.
"He's always been a good player, a dangerous player, but under Pep he has become one of the best in the world," said Xavi.
"I know how Pep works - he would have worked closely with him since his arrival - where he needs to improve and what he needed to work on.
"We're now seeing the results of that - he's still young and can be the world's best."