England head coach Fabio Capello has been full of praise for Walker, who has made the temporary switch from Tottenham to Villa Park for the rest of the season.
The right back spent the first part of the campaign on loan at Championship leaders QPR and has impressed since joining Villa. Walker's forward runs caused all sorts of problems for Blackburn during Villa's 3-1 FA Cup fourth round success on Saturday.
Houllier said: "I share Fabio's view that Kyle is a possible England player. I don't think he is the finished article yet. But we have given him the chance to play in the Premier League and he has taken it well.
"I think Kyle knows that he's got a lot of areas where he can improve. But what I like about him is his attitude, that he's eager to improve to progress. He's a modern day full- back, somebody who can defend and who can also get forward. These days The right back now has got to be able to be a defender, to play like a midfielder and also like a winger.''
Houllier said: "There is more joy, harmony, confidence around the side. I think we have improved physically and mentally. We are stronger with both of those. In previous games we used to concede goals at the end of games but now we score goals and we can hold on to results.
"In the last seven games we only have lost one game - and that was a match where we were down to ten men (against Sunderland). I very much want us to improve further.''
Houllier's stock has risen among the Villa fans who after the defeat against Sunderland three weeks ago were chanting "you're getting sacked in the morning''. But the former Liverpool boss has retained a level head throughout.
He said: "You heard some people say, 'You don't seem to panic.' I said, 'No, I am not panicking.' When there is a 'crisis' first of all the leader must be on the deck and make sure they say the right things. The fans understand what we are trying to do."