The 24-year-old was caught out defensively for Arsenal's second goal but redeemed himself later by setting up Roberto Firmino's equaliser.
Alexander-Arnold has won just 18 caps for England since making his debut in 2018 and has often found himself playing second fiddle to the likes of Kyle Walker, Kieran Trippier and Reece James for the right back position.
Occasionally, he has been left out of England squads entirely by Gareth Southgate due to his defensive frailties.
Neville was impressed with Alexander-Arnold's forward plays against the Gunners but wants him to equally pay attention at the back as well.
"He was absolutely sensational going forward," Neville said on his Sky Sports podcast. "I don't know what to say about him anymore because his defensive play is that bad.
"Some of the positions he takes up against Martinelli to defend a straight pass is schoolboy defending.
"I don't understand it. But some of his attacking play, his deliveries and his courage to get on the ball despite those mistakes has got to be admired. I admire him enormously.
"He doesn't need to become the best defender in the world. He just cannot be a liability. He doesn't have to be a great defender with the way in which he attacks. I don't think anybody is asking for that.
"You're just asking for a little bit of competence and attention to your work. The conversation will continue about him.
"I hope somehow over the summer the penny drops and he realises that his defensive work is hurting him.
"It's hurting him because he's been left out of the England squad. How can that talent be left out of an England squad?
"When you're playing for a team that is out of form such as Liverpool, those weaknesses get exposed a little bit more."
