Hodgson was sacked as Reds boss after just 31 games in charge at the start of 2011 following a poor run of results.
Dalglish, who replaced the 64-year-old after mounting pressure from fans, believes that he will be welcomed back on Merseyside.
"It will be good to see Roy Hodgson come back to Anfield," the Scot told the club's official website.
"I'm sure he'll get a good reception. Things didn't go as well as he or the fans would have liked when he was here, but he still deserves a good welcome."
Liverpool are currently 13th in the Premier League table, while West Brom sit 13th.