Free agent McFadden's representatives are reported to have held several days of talks with Celtic officials over a move to Celtic Park.
The 28-year-old has been without a club since leaving Birmingham at the end of a season ruined by a cruciate ligament injury.
But the Scotland international has received an offer from Wolves after spending two weeks' training with Mick McCarthy's side, and he has also been linked with Sunderland and former club Everton.
Ledley said: "He's a great player and I think he would be good for the team.
"Obviously it's down to the club to sort it out but we would welcome him to the club.
"I've seen him play for Scotland many times and he's a great player."
McFadden, who has scored 15 goals in 48 Scotland appearances, would add some experience to a young Celtic squad which has struggled in recent weeks, with Rangers 10 points ahead of them at the top of the Clydesdale Bank Premier League.
Ledley said: "I think we've got great players here anyway. Obviously we're young but there are a lot of young players who have a lot of international caps.
"It would be nice to keep that together and add a couple more in January but that's up to the club."