Recent reports have quoted Benitez as saying that he would like to return to manage Liverpool again at some point in his career, but Callaghan thinks that a return would not work out for either the club or the coach himself.
"A lot of Liverpool fans wanted him back [last summer]. Chelsea fans haven't taken to him," Callaghan told the Daily Mail.
"He's had a terrible reception from the Chelsea fans and I'm sure he's going to get a great welcome on Sunday.
"I feel [a return] doesn't work when you've been here once - or anywhere. I don't think it works for players either - if you've been somewhere and then gone to another club."
Callaghan is Liverpool's record appearance holder, having represented the Reds 857 times.