Spurs finished above their local rivals for the first time in 22 years last season, a 2-0 derby win in April breaking the curse of 'St Totteringham's' and helping prevent the Gunners from reaching the top four.
Despite stuttering form at home after swapping White Hart Lane for Wembley, Mauricio Pochettino's men have a four-point advantage over Arsenal ahead of Saturday's trip to the Emirates Stadium.
Sherwood believes that his former club have now left Arsene Wenger's side in their wake, and sees no reason why they cannot be the team to chase down runaway leaders Manchester City, who are eight points clear ahead of the Premier League's return this weekend.
"[It is] definitely shifting, I think you'd be a mad man to say that it's not," Sherwood told Omnisport on behalf of Tag Heuer.
"I think Pochettino's building something very special there, it's going to be very important he keeps hold of his best players and it's very important for Tottenham that they keep hold of him because he's done a brilliant job.
"He's had three and a half years to build something, he's strengthened where he thinks they need strengthening, they've got a thick enough squad now.
"I think that they have got the little bit of depth they needed, if they keep their players fit there is no reason why they can't challenge right down to the wire even with such a good side like Man City this season."
Sherwood managed the playmaker at Spurs and highlighted the impact he has had on his team-mates' development, as well as his technical abilities, as key factors in Spurs' recent resurgence.
"I always saw him as a world-class player, his training and work ethic are second to none," Sherwood added.
"Even though he is still a young man, Harry Kane has learnt a lot off him – how to train, how to apply yourself day to day on the training field – he learnt so much from Christian Eriksen.
"It was no surprise to me that he destroyed Ireland, you give him that sort of space that boy is clinical, and he knows that he's got the ability but you would never guess it talking to him, he is so reserved, just happy with his lot all the time.
"He wants to be better, of course he does, and he knows how to work hard to improve himself, he's a dream to work with."
Tim Sherwood was speaking on behalf of TAG Heuer to promote the TAG Heuer Premier League Pressure Test. TAG Heuer is the Official Timekeeping Partner of the Premier League.