Stoke's summer signing scored his first Premier League goal for the club by finding the target in the 47th minute.
Walters, 27, a £2.75million buy from Ipswich, started out at Bolton - he was at Blackburn in his youth - when Allardyce was in charge.
Despite being angry at the way his side had allowed Walters to score in the 1-0 win, Allardyce had nothing but praise for the player.
Allardyce said: "Jon has done exceptionally well. It is down to his dedication and hard work and maximising his ability that he has finally made it back to the top level.
"Full marks and all credit to him because it has been a long journey through the lower divisions. You don't often see a young man today going down the leagues and getting back to the very top level.
"Obviously I am gutted he scored today because it has won them the game. That's the most frustrating thing for me, the way we conceded it.
"You don't often see our central defenders messing it up like that to let a nothing situation develop into a goalscoring situation. Bog-standard, basic defending has let us down."
Stoke manager Tony Pulis is pleased at the way Walters has settled in at the Britannia Stadium after moving up a division.
It was a clinical finish as well after he was released by Matthew Etherington following a towering flick-on from Kenwyne Jones.
Pulis said: "Walters is a fantastic pro who has been taken in by the rest of the players because of his effort and commitment.
"I am really pleased to see him score because it is a reward for everything he has done.
"He has has been marvellous since we signed him. It shows there are players out there that, given the opportunity, can come to the table and score."
Stoke have now secured back-to-back victories after beating Newcastle on Sunday - and have shot up the table in the process.
Pulis said: "Our position is different to a couple of weeks ago when we were bottom. We have learned in this league you have runs of games where you don't pick points up and runs where we do.
"We have better players on the pitch now, hopefully we can continue the progress we are making.
"We are pleased. It is an important result., Back-to-back wins are difficult to come across in the Premier League. We played some good stuff at times and created one or two chances and openings.
"It is just disappointing we were not a bit more clinical. Late on they put us under pressure and you are always worried the ball will drop and end up in your net."
Blackburn failed to test goalkeeper Thomas Sorensen so Allardyce's decision to take El-Hadji Diouf off in the second half seemed a curious one.
However Allardyce explained: "I didn't want Howard Webb to send him off as he had already got one yellow card.
"I thought I would take him off for his own safety. He was getting frustrated."