He says it could provide the country with a "coherent future for troubled times" as the Brexit fallout continues to dominate politics.
The former Justice Secretary also says that a "majority of Scots" may be ready to vote for this if given the option in an article for the Times newspaper.
He appears to back former Prime Minister Gordon Brown's call for a a fresh constitutional convention after previous bodies were set up to bring about change in Scotland.
"A third historic constitutional convention, at a time of political impasse, offers the chance to resolve Scotland's problems," he writes.
"Those who invoked and advocate federalism have an obligation to step forward and seek to define it. Others should be welcomed and would doubtless take the chance to contribute to a better constitutional settlement or even just from fear of public opprobrium if they didn't. Both the status quo and independence wouldn't be on the agenda.
"The former isn't tenable and the latter isn't sought by a majority. Federalism offers a potential route forward for unionists to improve the constitutional settlement and for Nationalists to maintain the dream.
"It also allows a coherent structure for troubled times and one that has been sought by many for a long time."