Gerrard has made just five appearances this term, with his latest game being against Norwich in October. Fears were raised over his long-term fitness when Gerrard was pictured leaving a medical centre with his leg in a protective cast.
His problem was put down to an infection and no timescale had been placed on his recovery, but Reds boss Dalglish is happy with the England international's progress.
"Steven is progressing brilliantly," Dalglish said. "There is nothing that's been a disappointment other than he's not been available for selection. He'll be available as and when he's over what he's got but everything's going really well. We couldn't ask for more or any greater news from him."
Asked on whether there was a date set for Gerrard's return, Dalglish said: "No. When he's ready."
But Jamie Carragher is back in training and in contention to face Chelsea at the weekend.
"Carra is training," Dalglish said. "He's got rid of his calf injury so he's fit and available for selection."
Meanwhile, Dalglish refused to be drawn on Luis Suarez's racism charge by the Football Association, preferring to highlight the Uruguayan's red-hot form for his country.
Suarez was rocked on Wednesday when the FA hit him with a charge following an altercation with Manchester United defender Patrice Evra last month.
Liverpool were swift in their response, insisting the forward would plead not guilty and that they were fully supportive of Suarez.
Dalglish was understandably asked for his views on the affair during his press conference on Thursday, but he batted them back before taking a swipe at a member of the press.
"I think the statement says everything and our position has not changed in any way, shape or form," Dalglish said. "That's all I've got to say."
When pressed again, Dalglish said: "I just said that's all I've got to say."
And following another question on the subject, Dalglish added: "I don't know if you've got wax in your ears but I just said the statement says what we've got to say and we have not changed our position in any way, shape or form."
Suarez scored four goals in a World Cup qualifier against Chile and drew praise from his manager.
"It's great for Luis to get four goals," the Reds boss said. "I wish it was for us rather than his country! Maybe he's kept some up his sleeve for us in the coming weeks."