"I'm not saying people like Whelan and Walters would have been playing every week if they had stayed, but just to have them in the changing room is so important," Etherington, who played 177 games for Stoke, told the Stoke Sentinel.
"You can't over-estimate how important that is. They were let go and that was a huge mistake by the club," he added.
Stoke are second from bottom in the league with 27 points from 33 games. The club sacked Mark Hughes in January and replaced him with Paul Lambert who has struggled to improve them.
Etherington said that he was less than impressed with the recent arrivals at the club with the likes of midfielders Jese Rodriguez and Mame Biram Diouf still not hitting their stride.
"The Premier League is such an unforgiving league and you've got to get your recruitment right, season-in-and-season-out. If you don't, you will get found out," Etherington added.
"They got it badly wrong... I said it last summer. I feared the worst back then when I saw some of the signings and I really didn't want to be proved right."
Stoke face 14th-placed West Ham United, another of Etherington's former clubs, in the league on Monday.
(Reporting by Shrivathsa Sridhar in Bengaluru, editing by Pritha Sarkar)
