The triple world champion, who is set to become the non-executive chairman of the Brackley based team, also confirmed he "helped" Mercedes with its Concorde Agreement negotiations with Bernie Ecclestone.
McLaren protege and Briton Hamilton to turn away from his boyhood employer.
"I was impressed with his approach to things, very pragmatic, no emotions whatsoever," Lauda told BBC radio of his talks with Hamilton.
"And think of it the other way round, if Schumacher couldn't get the Mercedes team running up front for three years and you (Hamilton) next year are doing much better it makes a huge impact on your personality and people will rate you much higher," Lauda recalled of his conversations with Hamilton.
"In the end it convinced him that the challenge is what he wants to do."
Naturally, there are some who believe Hamilton was also attracted to Mercedes for mainly financial reasons.
"The money discussion I was not really involved in," said Lauda. "The offer was very close to the one of McLaren."
Ultimately, Hamilton's move has divided opinions in F1.
Some think the 27-year-old is unwise to trade a surely competitive car for a Mercedes gamble, but 1996 world champion Damon Hill thinks the move was inevitable.
"Lewis has been like a caged bird at McLaren," he told the Daily Mail. "He'd been managed to within an inch of his life.
"You can have a bellyful of becoming a performing seal."
Niki Lauda said he will remain an expert pundit for German television.