Townsend was back in full training this week for the first time since suffering a hamstring injury against West Ham in December which brought an abrupt halt to the winger's remarkably successful start to the season.
After entering the campaign as a relatively unheralded member of Tottenham's squad, England international Townsend burst onto the scene with a string of superb performances for both club and country. The 22-year-old's nine-match spell on the sidelines could have been a major blow for Tottenham, but Sherwood's team performed well enough to earn him the manager's job on a permanent basis following Andre Villas-Boas's sacking.
With sixth-placed Spurs still firmly in the hunt for a top-four finish in the Premier League, Townsend's return is perfectly timed as fifth-placed Everton visit White Hart Lane this weekend. "He's in the squad so we're hoping that he'll be in and around selection," Sherwood said. "He's done enough training now for us to be confident that he can be dropped back into the squad. He's looked magnificent.
"The results don't suggest that he has (been missed), but I think whenever you've got a player like Andros, he can change a game in an instant. It's great to have him back and we're pleased to welcome him back to the squad. But the rest of the team has done very well over the recent period."
Townsend's return is a welcome boost for Spurs, who will be without Erik Lamela, Vlad Chiriches and Sandro through injury. A Tottenham victory would lift the north London club above their opponents and keep the pressure on fourth-placed Liverpool, who are just three points ahead of Sherwood's team and face a tough test against leaders Arsenal on Saturday.
Tottenham could certainly do with a boost after the embarrassing 5-1 home defeat to Manchester City was followed by a 1-1 draw at Hull. Neither Spurs nor Everton can afford a defeat this weekend and Sherwood acknowledged the significance of the showdown in the race for a place in the Champions League. "It's important because it's the next one and it's a team who are in and around us," he said.
"I think possibly the team who finishes fourth will be the one who takes the most points off the teams in and around them, and that includes Everton. It's very, very important and I'm glad that the players think it's as important as I do because they'll be reminded that it is a crucial game and it could be a springboard for us to go on a nice run again."
Sherwood, a surprise choice to replace Villas-Boas, has impressed during the early stages of his reign, but he will have to be at his sharpest to outwit Everton boss Roberto Martinez. The Spaniard has made a big impact at Goodison Park since replacing David Moyes following the Scot's move to Manchester United in the close season.
Martinez was careful not to change too much too soon, but he has gradually transformed the team's previously conservative gameplan into a more expansive style that has earned plaudits and points in equal measure. "When you are in a dressing room you can be open-minded or find it difficult to face change," Martinez said. "Footballers are creatures of habit, they are not open to change too easily.
"Our example is not the norm. You have a group of players very confident in what they do and from day one they have been open about new ideas. Slowly you put in little tweaks to make us more diverse and give us more dimensions and the change from week to week depends on how the group reacts to it."