Kelly, 21, is enjoying a breakthrough campaign, establishing himself at first-team level this term and now earning a first-ever international call.
He has headed off to join the Republic of Ireland international squad this week with his manager's opinion of him bound to raise a few eyebrows in the Irish camp.
Kelly has had to overcome doubts about his lack of stature to get where he is today and Stam believes Barcelona star Iniesta is not a bad comparison.
"It's not a bad name for Liam [to compare with] because he has certain qualities which Iniesta has," said the Reading boss.
"Because Iniesta has the experience you can say he's better at this point but Liam certainly comes close to him in what he can do and how he can play.
"It's not about him having the same quality as Iniesta and being at his level already. If they tried him at Barcelona and with the players around him he might do well as well.
"It's about adapting yourself to a system and you need an ability to do that. Liam has been outstanding for us.
"He can pass, move, he can get past in a one v one, defensively he is aggressive and he presses the opposition going forward.
"These are qualities that nowadays big teams like to have in their team - size now doesn't always matter."