Unbeaten Joshua is the IBF, IBO and WBA heavyweight champion, and is currently ranked as the world's best active heavyweight by the Transnational Boxing Rankings Board and BoxRec.
All of the 28-year-old's professional bouts have taken place in the United Kingdom, however, and three-weight world champion Toney believes that the Briton must prove himself abroad.
"Why doesn't he come over to the States? Is everybody scared?" the 49-year-old told the Toe 2 Toe podcast.
"Come to the United States to see if you're a great fighter or not, because the US has got the best. The best has got to fight the best.
"Boxing is in the United States, not the UK, so if you want to be known for your real-boy skills, you have to come to the US.
"I've gone to Italy, Japan, I've been everywhere, all you have to do is put your big-boy pants on and come to the United States and get your ass whooped or you will smash him. Either."
The biggest fight for Joshua at present is a unification bout with WBC heavyweight champion Deontay Wilder, who would like to fight on American soil.