Alcantara has been linked with a move away from the Spanish giants after becoming disillusioned by a lack of regular first-team football.
Manchester United were thought to be monitoring the midfielder's availability, but Xavi wants his Barcelona teammate to ignore the speculation and make a success of his career at the Nou Camp.
"I'd advise Thiago to stay patient because he's a player who is bound to be a success at Barca," Xavi told a press conference.
"I think he is an extraordinary player. Thiago is not just a player for the future, but he is someone who can make an impact right now as well."
The Italian-born Spanish international is under contract at Barcelona until 2015, but the 22-year-old has failed to break into the starting XI since making his debut in May 2009.
The youth team product has made over 50 league appearances for the club, but is reportedly considering his future as frustration grows at a lack of opportunities.
Alex Song, Sergio Busquets, Xavi Hernandez and Andres Iniesta all compete for three starting midfield spaces, and Thiago often has to make do with cameos from the bench.
Manchester United are believed to be keen to target a new central midfielder this summer, and Thiago would fit the bill in terms of age, sell-on value, Champions League experience and international ability.