The Colombian joined the Anfield side in January from Porto and hit the ground running, contributing seven goals from 13 Premier League games.
He also came up big in the Champions League, bagging a goal and assist in their 3-1 quarter-final win over Benfica and a goal against Villarreal in the last-four.
Diaz's eye-catching performances led many to consider him among the best signings of the season, and Berbatov echoed the sentiment.
In his column for Betfair, he wrote:
"Liverpool's Luis Diaz has been one of the signings of the season. I can't think of anyone else who has had a similar impact. The way he produces and plays football has been very impressive."
"When he first signed I didn't know where he would play and how he would fit into that Liverpool team with so many good players up front. But he has been unbelievable every time he has stepped on the pitch."
The Reds have made some astute signings under Jurgen Klopp, including Mohamed Salah, Alisson, Sadio Mane and Virgil van Dijk.
Berbatov also praised the club's scouting program for getting it right with Diaz.
"It's great again from the scouting department at Liverpool, they've proven again they know what they're doing."
The Bulgarian further reflected on how new signings struggle to adapt to new surroundings sometimes but heaped praise on the 25-year-old for adapting to life quickly in England.
"Some players take to a new league immediately and he is one of them. He's not shy and I think he's found it easy to fit straight into the team. When some players come into a new team they can be shy and find it difficult. I was like that, I needed more time to properly get into the team."
"He is clearly the opposite and he has produced his best so quickly. Credit to the coaches and everybody there."
Couldn Liverpool make more signings?
After their Champions League final loss, Liverpool could be set to make some new signings this summer, especially with Sadio Mane reportedly set to leave.
The Reds have also seen their arch-rivals Manchester City sign Erling Haaland and would think of strengthening their squad to launch another Premier League title challenge next season.