Rossi is returning to the Japanese manufacturer after two unsuccessful seasons with Ducati, with which the Italian failed to win a race and scored just three podium finishes.
The Italian rider, 33, will be riding alongside reigning champion Jorge Lorenzo.
Although Rossi has not won a race since the 2010 Malaysian Grand Prix, Honda newcomer Marquez reckons the veteran will show his class again with Yamaha.
"Valentino is Valentino and you can never rule him out," Marquez said during the launch of the new Honda on Thursday.
"I think he will be up there on the podium and winning races.
"To win the championship... Jorge and Dani are there in great shape. They are both in the best moment of their careers, but I think Valentino will be making things difficult for them.
"He hasn't lost his talent and hasn't forgotten how to ride a bike."
Pedrosa also reckons Rossi is likely to be competitive, but he thinks only time will tell if the Italian can replicate the kind of form which carried him to his seven premier class titles.
"I guess a lot of fans are happy that he's back to Yamaha, hoping that he's fast again," Pedrosa said.
"As a for talent, there are no doubts, but we have to see if he rides flat out again or not.
"I believe so, but we have to wait and see if he is the same Valentino he once was.
"We have raced against him and we know about his talent, so we don't have a lot of doubts that he will be competitive again."
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