Babbel has been sidelined for just over a year with the debilitating Guillan Barre Syndrome, a potentially fatal condition which affects the nervous system.
But the Liverpool boss confirmed that the German defender is close to making his long awaited return to first-team football; a substitute appearance in the Community Shield remains his only competitive action for the Reds since coming off at half time during a 2-1 defeat to Bolton Wanderers last term.
Houllier said: "Markus started the season very well then he had a bit of a dip which was quite understandable.
"We were expecting that, as he was so high then went down very quickly. Since then he's been doing very well. He's on his way up and it won't be long before he gets into my team."