The Spaniard, obviously frustrated with his dire situation at McLaren-Honda, will make a bid for victory at the fabled Indy 500 next month.
And Lauda, the triple-time F1 world champion and Mercedes non-executive chairman, says he understands why Alonso wants to do it.
“He’s bored,” the great Austrian told the Spanish broadcaster Movistar, “and he needs a challenge.
“As a driver I understand, but for McLaren to let him go in the most important race of the year and where they can have their best result is a tough decision to make.
“It’s a good decision for Alonso because he can enjoy things there that he cannot do here, and I’m curious to see what he can do at Indy,” Lauda added.
Beyond 2017, however, Alonso’s future is wide open. He is said to have already had talks with Renault, but the ‘big two’ in F1 are Ferrari and Mercedes.
Lauda doubts either of them are options for the 35-year-old.
“He left a lot of trouble with his teams when he left,” he said. “I don’t think Ferrari wants to have him again. He left with a contract. The same thing happened with us (McLaren-Mercedes).
“We (Mercedes) have drivers who do their job, so if we win with Hamilton and Bottas, we don’t need a replacement.”
Nonetheless, Lauda said Alonso’s actual talent is beyond dispute.
“He is fast, aggressive, in this way he is the best. But unfortunately, drivers sometimes cannot prove they are the best by the decisions they make, and Alonso has made many mistakes,” he said.
“He left Ferrari very early and decided to go to McLaren, but the problem with Honda’s engine development was already known. Now he’s disappointed, but going to McLaren was his decision,” added Lauda.