"This is the best innovation so far and would make the game much fairer. The use of such innovations would make the game more attractive," Khan told AFP on Thursday.
The International Cricket Council (ICC) is considering a proposal to allow teams to appeal against on-field umpires' decisions.
A team would have the right to refer three decisions per innings made by an on-field official to the TV umpire. If approved at next month's ICC meeting the rule is likely to be experimented with in the ICC Trophy in India in October this year.
A similar system was successfully implemented in America's National Football League with teams permitted to challenge two refereeing decisions per half, resulting in an immediate TV replay review.
Khan, who took 362 wickets in 82 Tests for Pakistan, said he confronted some bitter moments due to umpiring decisions during his 21-year career.
"During my career so many times some critical decisions changed the complexion of the match and the most notable being the semi-final of the 1987 World Cup when I was given out caught behind when I was not out.
"We couldn't win a series in the West Indies in 1988 just because Viv Richards was not given out in the final Test. Had we had an appeal system we would have benefited," said Khan, now member of the national parliament.
The 53-year-old former all-rounder said he was surprised at the decision by the Pakistan Cricket Board to oppose the proposed system.
"People who stick to traditions would oppose it. They opposed the innovation of run outs and stumping decisions referred to the TV umpires, but it has successfully minimised the controversies," said Khan, who proposed neutral umpires back in the 1980s.
Khan said umpires were prone to mistakes but would be extra vigilant if appeal system was introduced.
"There would be two benefits -- umpires would be extra vigilant and fans would see the best team win. Teams would also ensure that they get justice and must ensure they don't waste their three appeals," said Khan.
Khan disagreed appeal system would kill the tempo of a match.
"Who cares about the tempo? If you have one wicket left and need two runs when a bad decision come and you have the right to appeal it would give you life. Even the fans would love this as they always wish the best team to win."