Lula said the Brazilian constitution only allows presidents to seek re-election once so he has not considered running for another term in October 2010. "I haven't discussed this possibility: primarily because there is no third term; secondly because Dilma is fine."
However, Ms Rousseff had surgery last month for the removal of a malignant tumor from her armpit and has undergone chemotherapy for lymphoma.
Ms Rousseff was discharged from a hospital in São Paulo, on Tuesday, after being admitted on Monday with leg pains related to her treatment. She told reporters it was not serious and she was "back in shape".
"Luckily there was nothing more serious and I'm back in shape," said the president's aide.
"Yesterday was a bad day, I won't say it wasn't. Pain is always uncomfortable," added the former guerrilla fighter, who was tortured during Brazil's 1964-85 military dictatorship.
"When my hair grows back to the length of men's (hair), I hope to take off the wig. It's tiresome," she said.
President Lula handpicked her to run in the October 2010 election, but doubts over her health have led some supporters to revive the idea of a Plan B, which is that the most popular president in Brazil's recent history could run for a third term.
In order for Lula to run an amendment to the constitution would be necessary. But the Brazilian president has repeatedly rebuffed the idea of such a move as well as his own desire to stand again.
Rousseff's illness is likely to improve the chances of her main challenger, São Paulo state Governor José Serra of the opposition Brazilian Social Democracy Party. Serra was beaten by Lula when they ran against each other in 2002. He is also favored by many investors for his vast experience in government and his party's track record of market-friendly policies.
Party leaders in Lula's governing coalition began discussing the possibility of an alternative candidate.
"I like and respect minister Dilma but I think the PMDB should have its own candidate," said Senator Pedro Simon of the centrist PMDB party, the largest in the coalition.
The PMDB, whose support may be decisive in next year's election, requested an emergency meeting with Lula to discuss Rousseff's condition,
Part of the PMDB may now be more inclined to back Serra, who lost to Lula but leads Rousseff by about 30 percentage points in opinion polls.
Mercopress