The former Parkhead forward hailed Stokes' new-found maturity and urged the Irishman to use his new deal as a platform to kick on and repeat his domestic form on the European stage.
But Hoops hero McGarvey has urged manager Neil Lennon to splash the cash raised from big-money summer sales on a marquee signing in the New Year.
He said: "We haven't seen a big box-office signing. Football is about entertainment.
"Fans pay good money to turn up every week and I'd like to see a player in there who can really get people on the edge of their seat."
The deal for Stokes has been in the pipeline for months, with the club and the player going backwards and forwards since the end of last season.
Getting the contract finally settled should give the player, the stability he needs to improve, according to McGarvey.
"I think he has done well this season and he is a player who will always score goals in the league for you," he said. "But let's see now if he can kick on and move it up a gear.
"He is keen to be recognised as the No.1 striker at the club but he still needs to look at what the likes of Gary Hooper managed to do in Europe and look to follow in those footsteps.
"I don't doubt that Stokes has natural ability but he seems to have matured a bit now as well.
"If he keeps improving then he can really test himself against the very best."
Stokes, who has fired 53 goals in 120 games for Celtic was delighted to finally get the deal over the line.
He said: "I've been happy enough with the way it's gone for me this season. I'd have liked a few more goals by now but that'll come.
"We're unbeaten in the league, we've been doing reasonably well in Europe and we need to get another couple of results now after that big win over Ajax.
"Overall, I've been delighted. I'm enjoying my football and I'm hoping this just helps me kick on.
"It's been great to be involved in Europe after being injured last season.
"It was hard to watch the lads doing well and not have any input, so I'm delighted so far with this season.
"I knew this was going to be a big season for me because I had to come back after missing the majority of last season and I needed to come back strong and thankfully I've started the season reasonably well."
The former Arsenal, Sunderland and Hibernian striker recently won a recall to the Republic of Ireland squad following the exit of Giovanni Trapattoni, who he had fallen out of favour with, and played in their final two World Cup qualifiers.
Stokes said: "I'm delighted to be back in the Irish squad.
"You see the quality of the squad so I'm going to have to keep up my club form to try and stay involved in that."
Meanwhile, Celtic's Group H Champions League rivals Ajax last night beat ASWH 4-1 at home in a cup tie.