Simeone's charges beat Los Blancos 2-1 on Saturday at Santiago Bernabeu and Carragher has talked up the achievements of the Atleti coach, after seeing him lose the likes of Diego Costa, Thibaut Courtois and Luis Filipe this summer.
He told Sky Sports News: "They probably should have won the Champions League and I felt for them there.
"Maybe Simeone will get criticised in Spain, but job he has done is probably as good as anything you'll see for a long time.
"Especially when you consider he's competing with Real Madrid and Barcelona."
Atletico travel to Olympiacos in the Champions League on Tuesday.