The former Reds captain has left Los Angeles Galaxy and has been linked with a return to Anfield as he considers his future options
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Gerrard confirmed on Tuesday that he would not be renewing his LA Galaxy contract, with a decision yet to be made over calling time on his career.
But Lawrenson, who won five league titles with Liverpool, believes the 36-year-old could still make an impact in the Premier League.
"They will not have to pay him fortunes – they can tell him if they need him he'll play," Lawrenson, who insists Gerrard could "definitely play in this Liverpool team", told BBC Sport.
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"The most important thing in all this, though, is that he would not be seen as a threat by Jurgen Klopp if he was on the coaching staff.
"He would be brilliant to have around the club because he would be in awe of Klopp, so that is just not a worry. I am sure Klopp would love it too – the only effects would be positive.
"He has already coached Liverpool's under-16 team for a while in 2015 and really enjoyed it.
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"If you are an under-16 and getting coached by Stevie G, then how good is that?"
Gerrard has already confirmed that playing and coaching offers have been put to him, giving him a testing decision to make in the coming weeks.
"I've learned a lot. Off the coaches and off my team-mates and I'll certainly use that for myself moving forward," Gerrard, who made 710 appearances for Liverpool, told reporters.
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"Although I'm going back to England to live, it's certainly not the end of me in football terms.
"I've got a lot of things to consider over the coming weeks and months and I'm sure I'll be back involved in the game somewhere down the line.
"I've got options on the pitch, off the pitch. I've got a bit of thinking to do over the next two, three weeks.
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"I'm not ready to make a decision or finalise anything that I'm going to be doing moving forward.
"What I will say is I'm going home to spend some time with my family and basically go over my options and decide which is the next best challenge for me."
Gerrard won the Champions League with Liverpool in 2005, but the Premier League title eluded him. Klopp's side sit currently top of the table after 11 matches this season.