Farrell along with Wales international Sam Warburton and England captain Dylan Hartley are all in the equation to be named captain when the Lions squad is announced on April 19.
Gatland is not giving too much away, but he has been impressed with how Saracens back Farrell has developed over the last few years and says he is a contender.
Gatland also praised England's current inside-centre for his flexibility and credentials as a leader, assets that will be needed in the summer if the Lions are to be victorious.
"I know his [Farrell] name has been discussed," Gatland said on Sky Sports. "The beauty of him at the moment is that he can cover two positions, 10 and 12.
"He's a great goal kicker, I think the way he has developed in the last three or four years, he is absolutely world class and I'm probably not giving too much away by saying he has a good chance of being selected.
"He's a real competitor. He probably didn't have his best game against Italy, and he'd admit that himself, but other than that he has played exceptionally well in the rest of the Six Nations.
"He's a fighter, he's a winner and I just really admire the way he has developed as a player. He is potentially in the mix to discuss as well."