The striker's teammates donned T-shirts carrying messages of support for him after he was found guilty of racially abusing Manchester United's Patrice Evra, a move for which the Scot was heavily criticised.
However, Dalglish has now denied that the gesture was his idea, insisting that his players were behind the show of support.
He told talkSPORT: "I didn't send them out in the T-shirts. The boys decided that themselves.
"You can't tell me they would have done that if they didn't believe in him and didn't have respect for him. It might not have been right, but it wasn't me that decided it.
"A lot of things are misinterpreted and misrepresented. I was brought up to be respectful and tell the truth, and what I believed to be the truth is what I said. I can't be any different in that."
Dalglish went on to say that he would have handled the situation differently today and condemn racism in football.
"I would do things differently," he added. "I would be less helpful and less forthcoming and that's sad. There's no place for racism in football in any way, shape or form."
United boss Sir Alex Ferguson previously said that he believes Dalglish's mishandling of the race dispute is what cost him his job at Anfield.