Sterling now seems likely to be included in Hodgson's 23-man squad after he was named man of the match in England's 1-0 win over Denmark on Wednesday.
The winger replicated his recent form for Liverpool by dazzling Denmark's full-backs with his trickery and pace.
The 19-year-old would have had his first England goal in the first half had he not hit a post from close range.
Hodgson knows all about Sterling having handed the 5ft 7in midfielder his debut as a 15-year-old in Liverpool's pre-season friendly against Borussia Monchengladbach.
Three and a half years on, Hodgson believes Sterling has become a much more complete player.
"When I gave him his debut he had incredible balance, but when he was a 15-year-old and he was playing against men, sometimes he could get knocked off the ball," Hodgson said.
"It has taken him a couple of years but now he has built up that strength and nous. Now you see something quite different.
"He's a player who you would do well not to mis-judge in terms of his strength.
"He still has the balance and strength to go by people but don't think you will bully him and knock him off the ball.
"In the first half he made a couple of incredible challenges."
Sterling's breakthrough season came last year and he was rewarded with a call-up for England's friendly against Sweden.
The midfielder lost his place in the Liverpool team this autumn, though, meaning Hodgson had no choice but to look at other options such as Andros Townsend, who enjoyed a stunning debut against Montenegro.
"You could accuse me, three or four months back of missing him (out), but he wasn't playing," the 66-year-old added.
"He is selected (for England) now because in the last two or three months he has not just been playing in matches, he has been starring in them, and I don't think you have to be any sort of genius to work out that a sterling player like that deserves his place in the England squad."
There seemed little doubt in Hodgson's mind that he was blooding a future star when he put Sterling on the pitch just a few months after Liverpool signed him from QPR's youth team.
"He actually won us a penalty in that game with 10 minutes to go," Hodgson recalled with a smile.
"But the referee, in front of 70,000 Borussia Monchengladbach fans, decided not to give it."
With Sterling, Adam Lallana and Luke Shaw having all played well on Wednesday, questions inevitably arose concerning England's old guard.
Although Ashley Cole impressed on a rare first-team outing, neither Frank Lampard nor Michael Carrick were given a chance to push their case for a ticket to Brazil.
Last June Lampard captained England to a creditable 2-2 draw against Brazil in the Maracana, but his chances of heading back to Rio de Janeiro this summer now hang in the balance.
The 35-year-old has only started one Premier League game since the turn of the year, but Hodgson has told the midfielder he is still in his thoughts.
When asked whether the 104-cap midfielder was vulnerable, Hodgson replied: "No. No more vulnerable than everyone else, I suppose.
"I played Steven Gerrard the whole game. Had I wished to spare Gerrard then of course Frank Lampard and Michael Carrick would have been the obvious choices but Steve has not a game at the weekend and he was playing so well and we had so many young players on the field, I thought he would try to keep him on.
"As far as I am concerned, Frank Lampard and Ashley Cole are two people who are still very much in the reckoning for a place.
"I will have to make a decision one day."