The Reds return to Europe's premier competition for the first time in five years when they host Ludogorets Razgrad on Tuesday.
Ex-United star Scholes thinks that Brendan Rodgers's side should be considered as outsiders for the tournament, despite their prolonged absence from the competition.
He told ITV Sport: "Liverpool are the dark horse of the competition this year.
"Brendan Rodgers has done a fantastic job. The style of play he's adopted is exciting to watch and the players seem to have taken to him. I feel they will do well with the players they have.
"The big advantage they have is a home crowd. Anfield is always a hostile place to go, which is something Manchester City lack."