The Reds boss was speaking the day after watching his captain drive the team on to a Carling Cup semi-final first leg victory over Manchester City at the Etihad Stadium, courtesy of a 13th minute Gerrard penalty.
"It's fantastic for everybody," confirmed Dalglish. "Over the past couple of years he's had a couple of disappointing spells where he's picked up injuries through no fault of anybody.
"He picked up a couple of infections which were completely unrelated. He's come back fantastically well and is starting to get himself back to full fitness.
"For us, for Steven and for everybody connected with football club it's fantastic news. We're delighted for him and are looking forward to him getting back to full fitness and working hard for us and with us."
Gerrard's influence on the pitch is clear for everyone to see, and it's fair to say that the entire squad has been lifted by the skipper's return from injury.
Dalglish paid tribute to the 31-year-old's leadership qualities, but is equally grateful for the role the midfield maestro plays off it, and behind the scenes.
"He does everything," enthused the Scot. "People only see what he does on the pitch. It's the same for Carra [Jamie Carragher] as well who is also influential among the young players. They are two great examples for them to sit and look up to.
"Steven, being the club captain, is very impressive - if there's a problem to be sorted in the dressing room, which isn't very often, he'll deal with it and it doesn't come any further than the dressing room which is fantastic for us.
"It doesn't happen too often but if it happens he steps in. So he stands up to be counted on and off the pitch. He's been a fantastic servant to the football club so let's hope he gets past his present contract as well.
"He's been here since he was a very young boy. In this day and age there's not many people who go through their football career and represent just one club, especially people with quality like Steven.
"It's not as if he's been at a football club that's been without success either. If you're happy where you're playing, you're enjoying what you're doing and you enjoy the football club I don't see any reason to move, and it's fantastic for us that he hasn't."