Speculation that Spears was in talks for a stint at famous Vegas hotel Caesar's Palace began earlier this month, with later rumours suggesting that she had agreed a $100m deal.
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Madison, who previously starred in the Vegas burlesque show Peepshow, has now revealed that she would love Spears to take a job in the city.
"She'd be fantastic!" she told Life & Style. "I think she would have so much fun."
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Madison, who claimed that Spears would be a "great headliner", also suggested that she would bring something different to Vegas.
"There are so many great headliners in Vegas, but they are a little bit older," she said. "[Britney] strikes a chord because she's young, so I think she would do really well."
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Recent reports have suggested that Spears's family and friends are concerned about the impact a Las Vegas residency could have on her health.
The rumours that Spears could take on a Las Vegas residency come shortly after she left her post as a judge on The X Factor and split from her fiancé Jason Trawick.
