Youngster needs to sharpen tactical instincts but will go to World Cup...
The former Liverpool defender and BBC pundit argues that Walcott has the pace and skill to become a top player, but his lack of footballing instincts mean that he is at present a long way away from the finished article.
"With the pace and trickery he possesses in abundance, Walcott will always make a living from the game, but the big unknown is whether he has enough to make it right to the top and be remembered in 20 years' time as a great player," Hansen told The Daily Telegraph.
"Only time will tell, but when the former England winger Chris Waddle claimed last week that Theo does not have a football brain, it was a fair observation.
"It is no slight on a player to accuse them of not having a football brain. You either have one or you don't.
"It is about natural instinct, the innate ability to see things before they happen. Wayne Rooney has it and Kenny Dalglish had it."
Improving those footballing instincts is no easy task either, according to Hansen.
"He can certainly improve on his deficiencies, but the areas that he has to sharpen up just happen to be the most difficult qualities to fine-tune," the Reds legend added.
"It is about seeing options, seeing them early and then being able to pick out the right pass at the right time. If he improves all those areas, he can be a 9 out of 10 player. At the moment, he is 7 out of 10.
"He can beat a defender and get to the byline with his pace, but he doesn't deliver the right cross often enough and he lacks the consistency of others.
"We have all seen what he can do when he gets it right, though. His wonderful slaloming run to set up Arsenal's second goal against Liverpool in the Champions League a couple of years ago made everyone think what a player he could be.
"But he hasn't done that often enough since and he has to do better on a more consistent basis if he is to prove himself at the highest level."
Hansen nevertheless believes that the Gunners' youngster, who turns 21 next month, will be a part of Fabio Capello's England squad which travels to the World Cup in South Africa this summer.
"Despite the room for improvement, though, I am certain that he will go to the World Cup," he said.
"Walcott's pace is a phenomenal asset at the highest level, and that, rather than his versatility, is the reason Capello will pick him.
"The Italian then has to decide between David Beckham, Aaron Lennon and Shaun Wright-Phillips for the other vacancy.
"England's problem is that, of the four players vying for the two right-midfield slots in Capello's World Cup squad – Walcott, David Beckham, Aaron Lennon and Shaun Wright-Phillips – only one, Beckham, has a football brain, but he can't run."