The former Blancos star believes Carlo Ancelotti and Pep Guardiola's sides are the strongest in Europe and is hoping they meet in Lisbon at the end of the season
The Bavarians are the defending European champions and have already booked a quarter-final berth by beating Arsenal 3-1 on aggregate.
The Liga leaders are set to join them thanks to their 6-1 first-leg win over Schalke in the last 16 and the 59-year-old, who spent eight years at Santiago Bernabeu, believes the two are the best sides in Europe.
"Bayern may be the strongest," he told AS.
"They have the best bench in the world, which is vital to compete in three competition, and have 16 or 18 starters.
"It would be good if the final was between Bayern and Madrid. They're the strongest. Ancelotti has stuck with the 4-3-3 and is getting stronger.
"And you don't have to compare the standings this year and last year. They are fighting for three trophies. At first there were doubts about Ancelotti, but it was the same in Pep Guardiola's first month at Bayern."
Barcelona have been criticised for moving away from the quick passing game which defined their ascent to the top of the world game over the last decade but Stielike believes results should come first for the 2011 winners.
"People are right in saying they are playing different. Possession is now less important and they want to be more efficient. But that doesn't change the strength of the team.
"One-touch football is more attractive, but at the end of the day, results count. Nobody askes if you touched the ball 18 times or four times if you win."
Finally, Stielike claimed that Bayern's brilliant form over the last 18 months has seen the Bundesliga break into two different factions.
"The first assessment is to be done in the Bundesliga. There are two tournaments. Bayern playing at the top and another in which there are three teams trying to get into the Champions League.
"There's a huge difference between Bayern and the rest."