The Reds currently top the table and go into this weekend's Super Sunday clash against third-placed Manchester City with a four-point lead over Manuel Pellegrini's men.
Although City have two games in hand on Liverpool, who also have a home game left against second-placed Chelsea, Souness believes the title is in the hands of his former team.
"For me, it's for Liverpool to lose," he told Sky Sports News. "You've got destiny in your own hands; you've got two games at home, against your two biggest rivals.
"It's not just the three points you take off them [if you win], it's the psychological damage you do to them. The only concern I have got going forward is that none of them have been down this road before.
"There will be nerves kicking in, and I think there was a little bit of that when they played Sunderland at home a couple of weeks ago [and won 2-1].
"That's my only concern because, with the kind of football they are playing, you can see them going on and winning every game left."
Liverpool have only dropped five points at home all season - losing to Southampton and drawing with Aston Villa.
The Reds have won 14 games out of 16, scoring 48 goals in the process - an average of three per game - and Souness says they are becoming a formidable force in front of their own fans.
"Brendan Rodgers deserves a great deal of credit for taking them from where they were a year ago to where they are now," he said.
"They have made Anfield a fortress again. Nobody enjoys going there because of the football they play, the tempo they play at. They play with aggression, and, of course, there is the support they have got behind them.
"I believe, and I have always believed, that Anfield is the best place to play in English football. It's an old, traditional stadium but that means maybe the supporters are that little bit closer and can create a better atmosphere.
"It's a great time for Liverpool. It could be the beginning of a new era for them."
Luis Suarez and Daniel Sturridge are already the second-best strike partnership in Premier League history with 49 goals between them this season behind Andy Cole and Peter Beardsley, who bagged 55 in 1993-94, which was a 42-match season.
But City are likely to be boosted on Sunday by the return of top-scorer Sergio Aguero, who netted 15 times before missing the last five matches with a hamstring problem.
Souness says that Liverpool must not underestimate the 2011-12 champions.
"City won't get away quietly," he reflected. "It's very important this weekend but City won't go away. They will believe they can go on and win it.
"They haven't got any distractions and they will keep believing but it is Liverpool's to lose - and what a great position they find themselves in."
Liverpool against Manchester City kicks off a massive Super Sunday - coverage from Anfield begins at 12.30pm on Sky Sports 1.