The German giants are set to welcome Premier League title hopefuls to the Allianz Arena on Wednesday.
Their heavyweight last-16 encounter in Europe’s elite competition is locked at 0-0 from the first leg at Anfield.
With all to play for, both sides believe the quarter-finals are within their reach.
Matthaus feels Bayern are capable of progressing, but has urged them to favour a cautious approach when taking on a side that boasts plenty of goal-scoring threat of its own.
He told Sky Deutschland: “0-0 is a decent result on the face of it but of course Bayern don't have an away goal, and that's all the more dangerous when you're playing Liverpool, who carry a huge attacking threat.
“Bayern have to find the right balance - don't concede, and score one themselves, that's all they need.
“But the balance is very important - and also very dangerous: a bit too attacking, and Liverpool can exploit that; too defensive, then that'll maybe reduce Bayern's own attacking threat.
“They've got to score a goal somehow, because I don't believe that in a game like this you can aim for a 0-0.”
The likes of Mohamed Salah, Roberto Firmino, Sadio Mane, Robert Lewandowski and James Rodriguez will be among the attacking talents on show in Munich, but Matthaus feels it could be Bayern’s defensive stars that shine brightest on a continental stage.
He added: “You start with a solid defensive game, in the same way they played in Liverpool, but definitely not too defensive.
“Firstly they're playing at home, and secondly they've got to get a goal, but actually in recent weeks Bayern have been good at the back, compact, and that's how you keep in check a strong attack like Liverpool's.
“You can't throw everything at Liverpool from the start, no coach would be that crazy, because we know how strong Liverpool are, and that's why the approach in the first leg was a bit more cautious than in other Champions League games.”
While Bayern have been told to play it safe against Liverpool, Niko Kovac’s side have been full of goals over recent weeks.
They have found the target 11 times across their last two outings, with Wolfsburg hit for six on Saturday and Bayern having put five past Bourssia Monchengladbach a week earlier.