The England midfielder's place in Anfield history was assessed earlier this week after he signed a deal which should keep him at the club until the end of his career.
"I would say it is between Kenny Dalglish and Steven Gerrard," Barnes told talkSPORT. "The difference is that when Kenny played in a great side he won three European Cups and lots of league medals.
"But I think if you look at the quality of a player it doesn't have to be him in a successful side, it has to do with him as a player and what he actually does for the club.
"So although Steven has only won one Champions League and he has not won the Premier League, and he hasn't won as much as other players, individually you would have to say he's in the top two. It's between him and Kenny."
Gerrard has played nearly 400 games for the Reds since he made his senior debut in 1998.