Speaking in Singapore to promote this year's WTA Finals, the 59-year-old Czech said she was pleased to see stronger competition in the women's game.
"Right now there is competition but not quite rivalry yet. But certainly, a lot of players are stepping on Serena's heels for the year," Navratilova said.
"It's not a foregone conclusion. The last couple of years by now, we pretty much knew Serena would end up world number one at the end of the year but this year it's up in the air.
Williams has not won a tournament since her triumph at Cincinnati in August.
Navratilova, an 18-time Major champion, said that Williams was under added pressure after last year's scintillating run, when she won three Grand Slam titles.
"The gap has gotten smaller and it may keep getting smaller because Serena won so many Grand Slams last year. She has a lot of points to defend.
"She's not exactly floundering, it's just the standard that she has set is so high, it's hard to live up to that. You cannot write her off, (it's) way too soon for that," Navratilova added.
This year, she lost to Angelique Kerber in the Australian Open final, to Victoria Azarenka in the Indian Wells final and in the fourth round at Miami to Svetlana Kuznetsova.
Her current form notwithstanding, Navratilova has backed Williams as she looks to reach the all-time record of the most career singles Grand Slam trophies.
Williams has won 21 majors, one shy of Steffi Graf's career total and three behind Margaret Court's all-time record.
"It's all becoming about Grand Slams now and that seems to be the only measuring stick that anybody cares about," Navratilova said.
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