Houllier finally signed on the dotted line on Friday after agreeing to become Martin O'Neill's successor a fortnight ago.
Now he is turning his attention to Young, who he intends to play in the 'hole' behind the striker rather than as an out-and-out winger. Young has just under two years left of his current deal and Houllier is confident he will commit long term to Villa.
Houllier said: "Am I hopeful Ashley will sign a new contract? Yes. It's going on well. The discussions are positive.''
Young's decision to stay would be a major lift after the departures of Gareth Barry and James Milner in successive summers to Manchester City. And Houllier believes he can become an England regular if he repeats his performances of recent games ahead of Sunday's derby clash with Wolves at Molineux.
He said: "We had a chat and all I told Ashley is that I thought he could be a leader not only in terms of quality but in terms of effort. He can be a star but a star as a team player. His input must not be only making goals and scoring goals. It's his work-rate and his attitude that can improve the rest of the team.
"How can Ashley become an England regular? If he keeps having the sort of performance he had against Bolton and Blackburn. To reach a further level you need to have eight or nine games out of 10 at the very top. Then suddenly you notice your game has gone up a level. He needs to have a regular top performance for a number of games. It's the consistency of the top production.''
Young has never been lacking in self-confidence since signing for Villa from Watford three and a half years ago.
But Houllier said: "One of the major ingredients of the very top players is that they always have a lot of confidence in themselves. They know that if they fail, they will probably get another opportunity and succeed. They are very confident and can take responsibility.''
Striker Gabriel Agbonlahor is winning his fitness battle by returning to training after suffering tight calves against Blackburn in the midweek Carling Cup clash. But defender Richard Dunne is again ruled out with a knee problem although Houllier is hopeful he will be fit to return against Tottenham next weekend.