Gareth Southgate, the England under-21 coach, Bournemouth's Eddie Howe, Hull City's Steve Bruce and former England manager Glenn Hoddle are among those who have been linked with the job by the British media.
Ferguson, however, said Sunderland manager Allardyce's experience of coaching in the English top flight should make him the front-runner if the FA decide to appoint a local.
"Sam's the best English candidate because he's in the Premier League," the 74-year-old told Sky Sports.
"It's very difficult to think of the right man and there are only three English managers in the Premier League. With Sam's experience, he is the obvious choice.
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"If it's Sam, fine. But they have to have someone with the capabilities, the tactical awareness and the feel for the national side."
A 13-time Premier League winner with United, Ferguson felt the gruelling domestic club schedule had played a role in England's disappointing Euro campaign.
"The league programme English players go through -- to then play a major tournament after that makes it impossible," he added.
"In Germany they have a rest in December and January and teams who play in a better climate must be better prepared than English players."
(Reporting by Nivedita Shankar in Bengaluru, editing by Nick Mulvenney)
