The former First Lady and US Secretary of State officially announced she would run for the White House this morning, after mounting speculation she would make a bid for the Democratic Party's nod in 2016.
It follows her failed attempt at the 2008 election, when she was beaten for the Democratic nomination by now US President Barack Obama.
Mr Key said if successful, Mrs Clinton would make a good political partner for New Zealand.
"It would be [good for New Zealand] in the sense that she knows New Zealand," he said on Paul Henry this morning.
"I've met her on lots of occasions, had dinner with her at Premier House a few times.
"As Secretary of State she was great, very engaged with New Zealand, very knowledgeable."
Mrs Clinton had "a very, very good chance" of winning, he said.
"She's got massive credentials, [she's] well known," he said.
"[She's] been there before, a lot of people thought she would get through the last time, but it's just so hard to know. You've got the Democrats essentially owning the White House for a long time now, anything's possible."
But it could be a "fascinating battle" between two of the US's biggest political family dynasties, Mr Key said, with Mrs Clinton confirmed as a candidate and former President George W Bush's brother Jeb Bush likely to announce he's running for the Republican nomination.
Mrs Clinton made her announcement this morning via Twitter and a video on YouTube.
She tweeted: "I'm running for president. Everyday Americans need a champion, and I want to be that champion."
Mr Key's comment follow Mr Obama's endorsement of his former Secretary of State at a regional summit in Panama on Saturday.
"She was a formidable candidate in 2008. She was a great supporter of mine in the general election. She was an outstanding Secretary of State. She is my friend," Mr Obama said.
"I think she would be an excellent president."
Mrs Clinton was last in New Zealand in November 2010, as part of her tour of Asia-Pacific countries in her role as US Secretary of State.
Over three days she visited Wellington and Christchurch, offering US support following the Canterbury earthquakes and reiterating US-NZ ties in trade, defence and the environment.
She signed the Wellington Declaration with Foreign Minister Murray McCully, to signal closer relations between New Zealand and the United States, with an increase in the strategic partnership between the two nations.
- Patrice Dougan of NZME. News Service
