"You don't realise how good some players are until you work with them," Dalglish told liverpoolfc.tv.
"Steven Gerrard fits into that category with me.
"When I was appointed Liverpool manager again, I began to realise what an incredible job he does on and off the pitch.
"I knew a lot of what he could do on the pitch. Everyone has seen the way he has grabbed some of Liverpool's biggest games by the scruff of the neck and dragged the team to victory.
"But, behind the scenes, you see how he understands the importance of the position that he holds as Liverpool captain.
"Some of the work he does encouraging his teammates and with representing the club is unbelievable.
"He will carry that on for England now that he has been made captain of the national team.
"He's a superb choice."