Tottenham suffered their first defeat in 12 games on Wednesday night when they lost at Liverpool though a last-minute winner from Roberto Firmino.
Spurs were made to pay for a couple of missed opportunities in the second half and they had to surrender their place at the top of the league table to Liverpool.
Waddle feels Tottenham have improved under Mourinho and are a much more resilient side under the Portuguese, who is trying to bridge the gap between Spurs and teams such as the Reds.
But the former Spurs star believes to reach the next stage Tottenham will need to improve their style of football and be better with the ball against the top sides.
Waddle said on BBC Radio 5 live: “Liverpool are champions and they are the best team in England.
“Tottenham and Jose Mourinho have made big strides and Mourinho is trying to get Spurs up to that level. That would’ve been a great result if it was 1-1 but again, Liverpool have got a result at Anfield.
“Tottenham have come a long way with Jose Mourinho.
“They have got a bit of steel about them, a lot of honesty.
“But with the ball, against the big teams, can they do a bit more?
“I think that’s the next stage for Tottenham.”
Tottenham beat Manchester City and Manchester United earlier in the season and took a point against Chelsea.
