"They're really good. Especially in the last two or three years, they've really developed themselves further," Schweinsteiger said in comments posted to the Man U website.
"Along with Bayern and Dortmund, they are among the three best teams in Germany."
Schweinsteiger's words will be welcomed in Wolfsburg, where the Wolves suffered a 5-1 battering by Bundesliga leaders Bayern Munich last week, with striker Robert Lewandowski hitting the net five times in nine minutes.
"If you look at the whole game, then it could well have finished another way," the midfielder said of that fateful night.
Wolfsburg is Volkswagen's company town, but Schweinsteiger said he was sure that the past week of revelations about the auto giant wouldn't distract the footballers on the pitch.
"Of course they've got Volkswagen behind them, but they have a good team with a good coach" in Dieter Hecking, he said.
Wednesday's encounter falls six years to the day after the two clubs first met, also in the Champions League.
On that occasion the English side came out on top, winning 2-1.