Celtic were beaten 1-0 by Anderlecht last night, with Brendan Rodgers' side putting in a poor display.
The pair often look totally at home when playing in domestic football, but the step up to European level is tough for them both.
And Larsson feels that centre-back is a priority position which Rodgers needs to improve, if Celtic are to start competing properly in the Champions League in future years.
"They are not doing what they are supposed to be doing," Larsson said. "Boyata is making too many mistakes. He needs to get the ball and give it to somebody quicker.
"They need to strengthen all over the park. To go to the next level, it’s a different kind of player. Can Celtic afford it, do they want to do it? I don’t know."
Rodgers’ side have dominated Scottish football ever since he took charge, but winning in Europe has proven tough.
Celtic did manage to come third in their Champions League group this term, which has secured their passage into the knockout stages of the Europa League.
However, Celtic will have to show a big improvement, if they are to stay in the Europa League until the latter stages.
The Bhoys were outplayed by Anderlecht last night, in what was a worrying display in front of their own supporters.