The midfielder recently returned from a groin injury that had kept him sidelined for six months.
"I think it's beneficial for everybody that Stevie hasn't been called up by England," Dalglish told the club's official website.
"He's got back to where he is right now because of the people that have been working with him. He's said himself that he has great faith in those people.
"I don't think it would have been helpful for Stevie – or us or England – if he had gone away for the game against Montenegro. I think it's a sensible decision for all concerned."
The Reds resume their Premier League campaign after the international break at home to Manchester United.