The 24-year-old England international, a £12million January signing from Tottenham, is preparing for Saturday's match at Norwich knowing anything less than victory will leave Newcastle in desperate peril.
Newcastle are three points behind 17th-placed Norwich, with a game in hand, after a 1-1 draw in the derby with Sunderland last time out.
Townsend said: "You could have said the derby was the biggest one of all time. Now, it's Norwich and that's the biggest game of our careers. Then it'll be the game after that.
"We have eight cup finals to come and we need to treat them like that. We need to start picking up points sooner rather than later."
Townsend and Jonjo Shelvey were part of a £29million recruitment drive in January, only for head coach Steve McClaren to be shown the door earlier this month following a dismal run of results.
Newcastle staged something of a coup in landing Rafael Benitez as McClaren's replacement, although the Spaniard could well leave if they do not retain their top-flight status.
Townsend is delighted to be working under a manager of such stature, but admitted he was sorry to see McClaren go so soon after his arrival.
He said: "Getting Rafa Benitez to come to Newcastle just shows how big the club is. He's won everything around the world and managed the best players, so it can only be a positive for us.
"We can stay up this season and we can keep one of the best managers at Newcastle.
"It's been fantastic with Rafa coming in, but it's no secret I was disappointed when McClaren left. They paid a lot of money to get me here and it was Steve who put his faith in me to get me here.
"This is football, and you need to move on."