Merino, who is contracted to Bundesliga side Borussia Dortmund, joined Newcastle on a season-long loan with the Magpies having the option of purchasing him.
Having made his second start for the club in Newcastle's 3-0 win over West Ham United, the 21-year-old drew plaudits for his all-round midfield display while his style of play was reminiscent of Alonso.
Benitez, who brought Alonso to Liverpool back in the 2004/05 season and managed him until 2009, agrees that the duo definitely share certain characteristics in terms of their playing styles.
"There are similarities," Benitez said, as reported by Chronicle Live. "I will tell you, though it maybe sounds stupid, that they are both Basque – from the Basque country.
"They are similar because of the position they are in and the way they read the game. Alonso's long passing was better but Merino is more mobile and more dynamic."
Benitez also added that he had been tracking the Pamplona native for a while and believes that, with consistent game time, he will be a hit in England.
"I've been tracking him for a while now. We knew him when he was in the Under-21s," he added.
"With him, he hasn't been playing regularly for a while. So his job is to keep going, keep training, get as many minutes as he can under his belt and he will get better.
"Yes [he's adapting to the pace], there have been a couple of situations [where he's been caught out]. But he is very dynamic, he is always moving.
"It's a question of understanding the game here. He has natural composure on the ball. There were a lot of players I had at Liverpool in the beginning who came from Spain. It's always difficult at first. But when you have quality, they eventually adapt to the pace of the game."
Benitez will be hoping Newcastle build on their first win of the season as the currently 14th-place team next travel to Swansea City on 10 September after the international break.