Suarez was the standout performer in the 2013-14 Premier League season, scoring 31 goals in 33 appearances to underpin Liverpool's title challenge.
However, Hodgson said he believes the 27-year-old - who is battling to regain full fitness ahead of Uruguay's crunch Group D meeting with England in Sao Paulo on Thursday - needs to shine at the FIFA World Cup in order to be rated alongside the best players on the planet.
"I think he will only be at that level when he shows it on this particular stage," Hodgson told reporters.
"He has got the potential. He is a wonderful footballer.
"But if you are really going to put him up there with (Diego) Maradona, Pele, (Franz) Beckenbauer and (Johan) Cruyff, and (Andrea) Pirlo, this is the stage you have got to do it on really.
"You can be a great player in your league but for the world to recognise you are one of the all-time greats you have got to do it at the World Cup."
Suarez missed Uruguay's shock 3-1 defeat to Costa Rica after undergoing minor knee surgery last month.
However, he will be determined to return against England, who were beaten 2-1 by Italy on Saturday, as both nations seek to keep their hopes of reaching the last 16 alive.
‘Maybe I’ll be signed by Wrexham, who knows? English football would suit me – if an offer came, I wouldn’t think twice, I’d go immediately’ Euro 2024 cult hero reveals his UK dream
‘Managing Leeds? It was an option that appeared, but it wasn’t the right timing. I decided it wasn’t a good idea to leave the club I was at mid-season’: Premier League boss admits to turning down opportunity to replace Jesse Marsch in 2023
