The American said that Dalglish and his assistant Steve Clarke were not entirely to blame for the club's disappointing form over the second half of last season but admitted a change had to be made for the Reds' long-term benefit.
"We had a very poor second half to the season last year. But we did not attribute that to Kenny as such, the things he and Steve [Clarke] were doing," Henry told the Daily Mail.
"The FA Cup would not have made any difference had he won it, no, no. We were 17th [in the form table] over the second half of the season and Liverpool should not be in that position."
"I don't place the blame on Kenny and Steve - but I think it was obvious to every Liverpool fan that something was wrong and something needed to be done in the current circumstances."
Henry went on to hail Dalglish's efforts upon his return to the club, uniting the playing squad after a difficult time under his predecessor Roy Hodgson, and reiterated that the Scot was only ever set to take the role on a short-term basis.
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The 62-year-old continued: "Kenny did say that if it was the manager's job, he would only do it until we had the right young man to come in for the long term. We spoke about it two or three times before he actually took the job.
"He was always saying no one man is bigger than the club. Everyone knows what it meant when he came back, how he brought all the disparate elements back together.
"There were a lot of different directions and he unified the club internally and externally. He did an incredible job of getting us all on the same page."