Heskey came off the bench to transform Villa's fortunes during the midweek Carling Cup tie with Blackburn.
And he responded after being given his first Premier League start for six months with a late winner in the 2-1 win at Wolves.
Houllier, who signed Heskey when Liverpool manager, said: "After the Carling Cup game, I said 'well done, this is what you are capable of, and there is no reason why you can't repeat that'.
"All players need confidence. Strikers need more confidence. Everyone loves Emile at the club, he is a good team-mate.
"What he needs is to keep believing in himself.
"I don't know whether he believes in me but I believe in him. That is more important.
"Because he plays up front and sometimes misses sitters, people get on his back and maybe that has hurt him in the past.
"But Emile fights for the ball in the air, tries to keep it and links up with the midfield.
"His work-rate was phenomenal and his understanding and movement with Ashley Young is good."
Meanwhile, Houllier dismissed reports that he had asked the French Football Federation to keep his role as technical director open.
Houllier insists he asked for a sabbatical to avoid having to serve three months' notice so he could start work at Villa sooner rather than later.
He said: "When you resign, you need to serve three months' notice.
"One way of turning that around is to ask for a sabbatical and then you are free immediately."
Wolves boss Mick McCarthy was unhappy that Villa defender Stephen Warnock was still on the pitch to lay on Heskey's late winner.
He felt the England defender should have been red carded for a challenge on Kevin Doyle after having already been booked.
McCarthy said: "Listen, it is a great header by Heskey and we shouldn't take that away from him.
"We could have done better when the ball comes in but I don't think Warnock should have been on the pitch.
"If it is a foul, it is a booking. Doyle has got Fletcher on the outside of him and it is a real attacking opportunity.
"It just rankles a bit. He shouldn't be there."
McCarthy was also less than impressed with the challenge by Villa midfielder Steve Sidwell on Adlene Guedioura which led to him being stretchered off.
McCarthy said: "Adlene has gone for a scan. It doesn't look good. He tried to put his weight on it so let's hope it is bruised and nothing else.
"It's his shin. It wasn't a nice tackle."