The Germans boss believes the Biancocelesti have demonstrated a significant improvement in recent times - to the extent that they could compete on Europe's biggest stage
The two sides meet at the Mercedes-Benz Arena on the back of contrasting fortunes, with the Biancocelesti coming off worse for wear, but that has not stopped the former Germany international from praising their Italian opponents for their recent rise.
"Lazio are a very strong Italian team and have improved a lot over the past two years," Labbadia said at a press conference.
"They have a very experienced side, like a Champions League team, and have a lot of very good individual players, especially going forward. We are happy, though, and are approaching the game in a good frame of mind.
Labbadia then explained how Stuttgart hope to make a statement of intent in the first leg and revealed Manchester United loanee Federico Macheda would be handed his first start in a Roten jersey following Vedad Ibisevic's suspension.
"We want to lay down a marker with a really good home game to give us a good platform for the second leg," he added.
"We know how strong Lazio are, but we are also strong - especially away from home. Vedad Ibisevic is banned so Federico Macheda will play from the start for the first time."