The Anfield boss watched the 33-year-old centre-back after he played the entire 90 minutes in his first-team return as part of a three-man defence against Chelsea last weekend.
The Scot said of his vice-captain: "He's a fantastic influence in and around the place. If he's on the pitch he can be a far greater influence.
"He was fantastic last Sunday. It's a great credit to him that he got through the game, it's a great credit to his professionalism and the respect he has for his body and what it takes to get through a football match, and it's great credit to the sports science people as well that he did get through the match because it had been a while since he last played - but you'd never have thought that.
"He's probably been the club's best defender for many years. I don't think there's anything original you can say about a guy who is 33 years of age. He is everything that everybody knows he is. He is a great credit and asset to this football club, and he'll be invaluable to us going forward."
Asked how Carragher compared to Alan Hansen and Mark Lawrenson, who Dalglish played alongside and then managed in the 1980s, the Reds boss, with tongue firmly in his cheek, said: "For me, Carra is better than Hansen and Lawrenson because he's playing now - they cannot play now because they're 50-odd years of age!
"He has been a fantastic servant, a great credit to himself and the football club, and Carra has been as good a defender as we've had for many, many years.
"We're fortunate that he's here and we're fortunate that he's so committed to the club."