The journalist and friend of the screen icon told ABC News that she thought Taylor's health had been improving following her admission to hospital in January for congestive heart failure
Walters said: "The man who was very close to her and helped me take care of her, Tim Mendelson - who was very devoted - had expected her to become better.
"She was in the hospital but she was doing well and I think it's a surprise that she died, because we who were in touch felt that she might make it.
She added: "Elizabeth Taylor once said to me that she couldn't remember a time that she wasn't famous - for her acting, her illnesses, her jewellery, her movies and the husbands - all those husbands!
"She had the sauciest sense of humour. From this gorgeous face came some fairly special words. That's one of the reasons that I did love her, because she was salty, she was down-to-earth, she never took herself that seriously.
"I don't think she realised what a great actress she was, because she was so beautiful and that's what was noted first."
> Obituary: Elizabeth Taylor
> Stars pay tribute to Elizabeth Taylor
> In Video: Elizabeth Taylor's movie roles
> Elizabeth Taylor on Hollywood, sex and marriage
> In Pictures: Elizabeth Taylor on screen
> Elizabeth Taylor: A Life In Pictures