The Reds have forced their way into contention for a first top-flight crown in 29 years.
Jurgen Klopp’s side have suffered just one defeat through 26 games, claiming 20 victories along the way.
They are, however, sat second in the table at present, with defending champions City back at the summit.
Pep Guardiola’s side are only leading on goal difference and have played a game more than the chasing pack, but they have been in stunning form of late – with Chelsea crushed 6-0 in their most recent outing.
With the Blues moving ominously through the gears, Souness believes Liverpool will have to be faultless from this point in order to end their long wait for domestic supremacy.
The former Reds star told Sky Sports: “City have put a marker down. Liverpool are going to have to win every single game to win this league. City have the bit between their teeth right now.
“The way Liverpool beat Bournemouth [on Saturday] doesn't confirm they're back at their best.
“But that result for City [against Chelsea] has confirmed after their hiccup, they're saying: 'We're bang at it, this is how we're going to finish the season'.
“If that is their form between now and the end of the season, Liverpool have to win every game. That's what they're looking at.
“City today have won 6-0 and you're thinking, with it being nearly 50/50 in possession, were they that good? Yeah, I think they were in the areas that mattered.
“When they came to defend, they defended properly as a unit and individually. Up front, they were getting goals, albeit through some mistakes from Chelsea.
“City have had their rollicking off their manager and they've had their points dropped. They're going to take some stopping if that's their mood between now and the end.”
Another ex-Liverpool star, Jamie Carragher, concedes that Klopp’s men need to offer a response to the gauntlet thrown down by City – with the Reds approaching some tricky fixtures of their own.
He said: “You look at it now with regards to points totals and whoever does finish second, how unlucky are they going to be?
“What Liverpool have got to do is they've got to respond in that week. If they come out of that week and they're still top, it's a case of right back at you, City.”