Some believe that the top team should have chosen a more established star like Fernando Alonso to replace 2016 world champion Rosberg.
However, Mercedes team chairman Lauda insisted: "The decision to sign Bottas was right."
The F1 legend indicated that Bottas is doing a good job in serving as teammate to the on-form now quadruple world champion Lewis Hamilton.
"I don't know what caused Nico's retirement, but Hamilton has reached a level where it's almost impossible to beat him," Lauda told Servus TV.
"This season, he made no mistakes and did incredible races even though the car was not easy to handle.
"Bottas did his job to push Lewis. Valtteri can perform a little better but the car was not easy to drive and he couldn't get any more from it."
Bottas came third in the 2017 driver rankings, 12 points behind second-placed Sebastian Vettel.