The Scot believes the former Aston Villa midfielder is a quicker and better footballer than he had expected before he made his big-money summer move to Anfield
Downing has come in for criticism in some quarters since his move to Anfield from Aston Villa, having scored just one goal for the club in an FA Cup victory over Oldham.
But Dalglish has used the midfielder 24 times in all competitions, and suggested Downing - naturally a wide midfielder - has had life on Merseyside made more difficult for him by the team's need for him to play in a number of different positions.
“Stewart is a fantastic footballer, an England international, who made a big move in the summer to come here,” Dalglish told reporters.
“For me, he’s better than I thought he was going to be.
"I don’t think it’s been too comfortable for him because we’ve played him in two or three different positions. Maybe we have to look at ourselves and say we have to be fair as well.
“But he’s better than I thought he was. He’s a better footballer - he’s also quicker than I thought.”
Downing is available for Liverpool as they take on Bolton at the Reebok Stadium on Saturday, with a win potentially enough to see Dalglish's side move into the top five.