Liverpool have won their last four matches to move within six points of the top four in the Premier League. It is a remarkable turnaround in a short space of time after flirting with the bottom part of the table during the first half of the campaign.
Agger feels the ability of Dalglish and Steve Clarke to restore confidence and belief in the players has been a major factor in Liverpool's revival.
"I played the last game against Bolton under Roy Hodgson and I think that is where it started and we began to play really well," he said. "A big part of it is Kenny and Steve Clarke.
"They have made a major difference, but it is also something to do with confidence, because it is the same footballers as before.
"Confidence can win you games and somehow Kenny and Steve have put the confidence back in the players and the belief.
"I think we have shown that definitely in the last four games. It is looking good, although there is still a long way to go."
Asked what Dalglish has done, Agger added: "He is a positive guy. In football terms, he is positive. First of all because he likes to play positive football, going forward, and keeping the ball on the ground. and I think he is good among the players.
"The training sessions have been really good and I think everything starts at the training ground. If you can get that right you have a big advantage in the games."
When asked if there had been any big speech from Dalglish, Agger said: "I think we will keep that inside Melwood. I think he is just himself and his ideas and Steve's ideas fit together.
"It is difficult to say. It is strange but, as I said before, it is the same players."
Even contemplating a Champions League spot seemed unthinkable a short while ago but Agger thinks they can become contenders if they maintain the current momentum.
He said: "It is going to be really, really difficult. It is a six-point gap and we have played a game more. I don't know if we can get in there but, if we can have a good run, and we are on a good run already with four straight wins, and if we can continue playing the same way, with the same confidence, I think we can get close.
"Everybody at Melwood agrees, and it sounds simple and stupid, but we have to take every single game and see where it takes us. I know that is the standard answer, but if you start to look ahead and count the games left and how many points you can get, you lose your focus. We do have momentum."