The 37-year-old scored two late goals at Ibrox on Saturday as the hosts came from behind to beat Motherwell 2-1 in the Scottish Cup.
Miller, who began his third spell at Rangers in 2014, has found the net seven times in 27 games this term.
"They've got to get him signed up," Ferguson told BBC Scotland. "For me, he's still the best player at Rangers."
Miller's current deal expires in the summer and the player has spoken of his desire to stay on, while manager Mark Warburton frequently talks highly of the forward who retired from Scotland duty in 2013 after 69 caps.
"I don't understand why he plays out on the left or out on the right at times," added Ferguson, who played alongside Miller at Rangers in seasons 2000-01 and 2008-09.
"He's got to play through the middle because most times Kenny's going to score you a goal.
"At this moment, he's looking as fit as I've ever seen him.
"I know people will go on about his age but when you get that bit older you look after yourself better.
"I don't think he gets enough credit. He's a very good footballer, a clever player. People thought he was just a workhorse but I always enjoyed playing with him."
Former captain Barry Ferguson is urging Rangers to offer veteran striker Kenny Miller a new contract.