The 50-year-old actress and model played fashion doll-brought-to-life Eve opposite Lohan's Casey Stuart in the original 2000 movie, and she would love to make a third film in the series.
Appearing on 'The Drew Barrymore Show', she said: "I feel like we should do one."
In the first made-for-television movie, Lohan - then 13 years old - played a teen who accidentally brings her doll to life using a spell which was meant to resurrect her mother.
Banks - who reprised her role as Eve in 2018's 'Life-Size 2: A Christmas Eve' - even has an idea for the potential movie to bring Lohan back into the fold.
She added: "I feel like I've been really looking at Lindsay and I feel like, what if she was a doll?
"What if she, in some kind of way, magically turned into a doll? And then my Eve character had to teach her how to be a doll. "I feel like that could be very interesting."
Over the summer, Banks teased the prospect of another film in the franchise after visiting the Polly Pocket-themed Airbnb in Massachusetts.
She wrote on Instagram in August: "Oh Polly Pocket, so small in size but BIG in memories and inspiration!
"I'm sure so many kids that loved my Life-Size movie thought of you while watching it... guess it's time to visit this lil place and dream up another script. "What say you, @lindsaylohan? xo Eve/TyTy."
Banks has been open about the idea since an appearance on 'Watch What Happens Live With Andy Cohen' back in 2020.
Although she didn't offer any details, she told the talk show host she was "working on 'Life-Size 3', although there haven't been any firm updates.