On the Stick to Football podcast, Carragher suggested Unai Emery could consider becoming Manchester United manager if the opportunity arose.
This is due to his idea of a hierarchy in football, which places Villa below the Red Devils despite their downfall over the past 13 years since Sir Alex Ferguson departed.
Carragher stated that “Aston Villa will never be Man United” before saying “I’m not trying to annoy Villa fans, but there is a chain in football, whether you like it or not."
“So Real Madrid will take Man United’s best player, they’ll take (Cristiano) Ronaldo. There’s very few above United, the same with Liverpool."
Villa issued a response on Friday evening, posting a statement on X that was signed by chairman Nassef Sawiris.
“Aston Villa will initiate legal action against Jamie Carragher for his unacceptable insults about the club and its fans,” the statement said.
“Aston Villa will not allow anyone to stop our ascension in English and European football. Nassef Sawiris, Chairman.”
Carragher has since apologised for using "clumsy and wrong" language, and said his comments were "tongue in cheek".
As per the BBC, Aston Villa have now dropped their threat of legal action against Carragher as pressure grows on Emery to decide on his future amid interest from a failing United side.
Carrick earned a two-year deal having led United to third last term, but as the side sit just above the relegation zone, the board are reportedly looking at swift replacements.