The defender was a target for Liverpool throughout the summer and it was reported that Van Dijk handed in a transfer request as he attempted to force a move.
However, Southampton, who developed a reputation for selling their star players over recent years, stood firm and refused to sell the Dutch international.
Le Tissier believes it was a huge step for his former club to change their transfer policy and believes they handled the situation perfectly.
“I thought they handled it excellently, I really do,” Le Tissier said on Sky Sports.
“Right from the start at the end of last season, they said ‘we are not interested in selling our players, we’re not interested’.
“Again, the length of contract was key for me. Southampton stood by their word, which for me was brilliant.
“At some point, yes we have sold our best players over the last few years, but if a club wants to progress, at some point there has to be a change in policy.
“This summer, I feel, was that defining moment where they’ve gone ‘right, enough’s enough, we’ve done well, we’ve progressed the club.’”
Watford boss Javi Gracia does not think Abdoulaye Doucoure's form will be affected by his omission from France's latest squad.