Defoe, 30, has spent more seven years as a Spurs player over two spells at the club.
During that time the England international has played with the likes of Dimitar Berbatov, Rafael van der Vaart, Robbie Keane and Luka Modric, but Defoe feels the squad assembled under Andre Villas-Boas is brimming with quality.
"I think it probably is the best squad since I have been here," he said.
"As a player I have always said when you are playing with good players it makes it easier. Especially as a forward, you know you are going to get chances in a game to score.
"There are players that could walk into other top teams in the Premier League, but it is great for everyone and keeps you on your toes because you know if you get an opportunity you have to take it.
"We have that winning mentality in training - it is just a good time to be here.
"There are players that can come into the team and do well so there is that competition which is always healthy. It is a great time to be at the club, we are playing with great players and the sky is the limit."
Defoe looks certain to start Spurs' Europa League last-16 tie with Inter Milan on Thursday as he fully recovered from injury and fellow forward Emmanuel Adebayor is a major doubt with a knee problem.
The former West Ham and Portsmouth striker reckons the camaraderie off the pitch is also the best he can remember at the club.
"I feel good and have trained for a full week with no problems, so I'm ready to go," he said.
"I was having a joke with Scott Parker and we were saying sometimes that if you have got a little knock you just need to stay on it and make sure you're fit and ready because if you are out of the squad someone will come in and they will do well, because it is such a good team to play in.
"I have been here for many years now and in my opinion, in terms of team spirit it is the best it has ever been.
"Everyone is buzzing around the training ground and putting the work in. Even the players that are injured are working hard to get back.
"It is the winning mentality that I think we have got now. In games when things aren't going great everyone gets stuck in and just keeps going, it is a good thing to have. It is important to have that I think."
Gareth Bale has been grabbing the headlines for Spurs of late and will have fond memories of facing Inter after he scored a hat-trick in a Champions League tie between the two sides in 2010.
"I don't think he has surprised me to be honest, he is a great player and what he has done over the past couple of months has been unbelievable," Defoe said of Bale.
"Even when he was at Southampton I always thought back then that he was special and it was always a matter of time until he cold make that step up into the Premier League and do the same.
"He has realised that he is a good finisher - in fact he is a great finisher with a great left foot. When things aren't going well in a game he can just take the ball, beat two players and score. I think he has got 16 league goals, that is amazing."
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