The Southampton midfielder has starred over the last two seasons, attracting interest from the likes of Arsenal, United and Tottenham, and is valued at £25 million.
Goal understands that the Red Devils are closing in on a deal for Schneiderlin and Domenech says that it would be in his best interests to move, especially if he has designs on making France's Euro 2016 squad.
"For him, [United] is a good move," Domenech told reporters.
"If he wants to be with the French national team, then he has to be in this Champions League - but if he stays at Southampton, no luck."
United are the front-runners for the 25-year-old, who has repeatedly flirted with the idea of leaving Southampton, and although Domenech agrees with his potential move to Old Trafford, he feels that there are still better options available.
"Manchester United is a good move for him," the ex-France boss continued. "United are better than Southampton, sure, but it's not [Manchester] City, it's not Chelsea. For him, the first thing is to leave Southampton.
"After, if he gets a team just behind the three big teams, it's good. Maybe after, he'll come through. He is good enough for the Champions League."