Hamilton, who finished fourth after an uncompetitive showing in China, said Mercedes' biggest problem this year has been understanding how to get the tyres to work at their optimum.
However, whereas previous year Mercedes had won four of the seven opening races by the time F1 arrived in Baku, this season they are yet to win from three attempts.
The Italian outfit took victories in Australia and Bahrain, which sees Vettel leading the championship from Hamilton by nine points as a clever strategy saw Red Bull win in China.
With the Prancing horse now opposing a challenge, and the inclusion of Aston Martin Red Bull Racing with their latest win at the Chinese Grand Prix, Wolff the current season is set to be a one to remember for fans in years to come.More news: Bear Bumps Price Target on Advanced Micro Devices (AMD) Following Q1 Upshot
Hamilton remains out of contract at the end of 2018 but emphasised that he has no ambitions to compete for anyone but Mercedes next season.
And while Hamilton does not think Mercedes are at their best, he is confident that both he and his team can turn things around.
"We're going into the race weekend in Baku feeling excited about that unpredictability" said Wolff.
"I don't either of us have that personality to say "I'm definitely going to be with them next year" and then not be with them next year so it is just about finalising and signing off". We would like to have won races but it has been a learning process. However, it was nothing compared to the intensity of this year's battle."Last year's race threw up a podium that nobody could have predicted and, as is the way with street courses, we can once again expect the unexpected".More news: Shahid Khan in Wembley Stadium Sale Talks, Could Move Jaguars to London
'Not everyone likes this kind of challenge but we love it'.
Chasing down Vettel and Ferrari is not a new experience for Hamilton and Mercedes.
He added that he had so far only discussed his future with Red Bull, who have said they want to keep him.
"Three teams are fighting fiercely for race wins" Wolff continued. Daniel Ricciardo (Red Bull) 37 5. So, we are second or third-fastest team at the moment. When you have had a harder slog to get there it always feels better. In this picture, Lewis Hamilton of Great Britain and Mercedes GP walks in the Paddock during previews ahead of the Azerbaijan Formula One Grand Prix at Baku City Circuit on April 26, 2018, in Baku, Azerbaijan.More news: Pirates Beat Tigers 8-3 For Doubleheader Split
Ricciardo said reports that he had some form of pre-contractual agreement with Ferrari were "not true".