Dalglish, who had his contract terminated on Wednesday after the club's worst Premier League finish for almost 20 years, was part of the great Liverpool sides of the 1970s and 80s.
He then turned his hand to taking charge with similar sprinklings of gold dust. Hailed as "King Kenny" on Merseyside, his achievements as goalscorer and manager will never be understated.
But in the 20 years since he left Anfield in 1991 and before returning for a second spell as manager last year, Liverpool have flattered to deceive.
Ironically, crowned Kings of Europe with a stunning Champions League victory in 2005, the red half of the port city have failed to keep up in the Premier League. They won the last of their 18 titles in 1990 and the best since then has been runners-up finishes in 2002 and 2009.
Dalglish, as part of the Liverpool fabric as the city's iconic Royal Liver building or the murky Mersey river, paid the price for a season of under-achievement in the league, their eighth-place finish deemed a huge disappointment by the club's American owners.
"We are committed to delivering success for our supporters and our ambition remains resolute to return this great club to the elite of England and Europe, where it belongs," Liverpool chairman Tom Werner said in a statement.
Principal owner John Henry added: "Our job now is to identify and recruit the right person to take this club forward and build on the strong foundations put in place during the last 18 months."
Dalglish's return in early 2011, ending the brief tenure of Roy Hodgson, was greeted with huge optimism by fans who months earlier had also welcomed new owners following the takeover by U.S. businessman John W Henry's Fenway Sports Group in October 2010.
The new owners have wiped out debts of £200 million and have made finding a solution to moving to a bigger home, or redeveloping Anfield, a priority as they seek a return to regular Champions League football.
But unable to compete financially with mega-rich new champions Manchester City, Russian oligarch-owned Chelsea or the income generated by Manchester United and Arsenal from large, modern stadiums, Liverpool have fallen behind.
At the end of January last year, Liverpool broke their transfer record twice in one day to buy strikers Luis Suarez and Andy Carroll following the sale of Fernando Torres to Chelsea for a British record of £50 million.
Uruguayan Suarez has mixed good with bad, his race row with Manchester United's Patrice Evra this season casting the club in a bad light and forcing the owners to intervene as Dalglish's staunch support of his player backfired.
Carroll has struggled for goals since joining from Newcastle but his good late season form, which earned a call-up for England for the Euro 2012 finals, offers who ever replaces Dalglish something to build on next season.
The burly pony-tailed Carroll was not the only Liverpool player suffering from inconsistency. Winger Stewart Downing and midfielder Jordan Henderson, who both joined last year for reported 20 million pound fees, have only shown glimpses of their potential.
Despite winning the League Cup and reaching the FA Cup final, Dalglish was ultimately judged on their indifferent Premier League campaign.
"Winning the Carling (League) Cup was nice - especially when you consider that Manchester United finished empty handed - but in Premier League terms the campaign has been really, really poor," former Liverpool striker John Aldridge wrote in the Liverpool Echo on Tuesday.
"To lose the final match at Swansea just underlines pretty much everything that has gone before - and emphasises how much work still has to be done."
Terry McDermott, who played with Dalglish at Liverpool and was on his coaching staff at Newcastle, warned the club not to appoint an inexperienced manager.
"They have to be top-notch. It's no good bringing a rookie in because then it's another two or three years while he beds in and brings his own players," McDermott told the Daily Post.
"It's got to be a real top quality Mourinho-like (manager). Maybe not (Real Madrid's Jose) Mourinho but someone like that who has seen it and done it."