Levy, usually known for his measured and calculated approach in the transfer market, took a big gamble on Monday night when he appointed Sherwood as Tottenham's new head coach.
Sherwood had been touted for the role on an interim basis until the end of the season, but the Tottenham chairman handed the former Spurs midfielder a deal until the summer of 2015.
The 44-year-old's only previous experience in management has been with the club's youth teams.
Acclaimed managers like Louis van Gaal, Fabio Capello, Guus Hiddink and Frank De Boer were all mentioned as possible successors to Andre Villas-Boas, but Levy has taken a punt on Sherwood and he is more than happy with his decision.
"We were extremely reluctant to make a change mid-season, but felt we had to so in the club's best interests," Levy told Tottenham's website.
"We have a great squad and we owe them a head coach who will bring out the best in them and allow them to flourish and enjoy a strong, exciting finish to the season.
"We are in the fortunate position of having within our club a talented coach in Tim Sherwood.
"We believe Tim has both the knowledge and the drive to take the squad forward."
A large number of Spurs fans were annoyed with Levy for sacking Villas-Boas, but the promise of bringing excitement back to White Hart Lane will strike a chord with even the most disgruntled supporter.
Tottenham's motto - Audere est Facere (To dare is to do) sums up how Spurs fans want to see their team play.
Ever since Bill Nicholson led the team to an historic double 52 years ago, Tottenham have been associated with free-flowing, attacking football.
Spurs fans laud heroes like Ossie Ardiles, Glenn Hoddle and Jurgen Klinsmann for delivering such football.
Gareth Bale produced that kind of magic three seasons ago against Inter Milan, and he did the same again last year during what was a truly phenomenal campaign for the Wales star.
This season Spurs have lacked any such zest. The team were a lot more slow and methodical in their build-up play. They scored just 12 league goals from open play under Villas-Boas this term.
Sherwood, who played nearly 100 times for the club between 1999 and 2003, is totally wedded to Spurs' attacking philosophy. That became evident on Sunday when he threw caution to the wind at St Mary's Stadium.
Sandro and Etienne Capoue were left out of the starting XI and in came Mousa Dembele, Christian Eriksen, Erik Lamela and Gylfi Sigurdsson - each one of them attack-minded players. Spurs won a thrilling match 3-2. The gamble paid off.
Levy will be hoping his own punt does not backfire.
- Sports & Recreation
- Tim Sherwood
- Fabio Capello