Stead, who returned to hometown club Huddersfield from Bristol City in the summer, made his first start of the season in Tuesday night's 2-1 win over Charlton alongside Vaughan, who scored his ninth goal in as many games this season.
"James has been fantastic," said Stead.
"He's a natural goalscorer and if he can keep fit he'll have a great season for us, so I know I'm going to enjoy playing alongside him.
"I think we can work well together. He's definitely among the top three or four strikers in the Championship.
"He's a good player and shows it in training. He's sharp and he'll score goals.
"You see the goals that he's got already, they're real goalscorer's goals, opportunistic and he's somebody I feel I can help get even more with my link-up play.
"The manager has been working a lot with us both on our positional play and James has shown with his goals this season that he has very good movement and awareness.
"I want to be playing and I want to be involved. I've got my sharpness back in training over the last couple of weeks and I feel like I'm ready now, so hopefully I can get an extended run in the side."