"I don't think Manchester United are as bad as the general public and pundits are making out," Townsend told BBC Sport.
"I don't think they're a shambles. I think Manchester United are a team in transition.
"There are big spaces because (Erik) Ten Hag's philosophy is to press high up the pitch. He presses high with Bruno (Fernandes), with (Rasmus) Hojlund and his attacking players.
"Does he have the defensive players to then press high with the attackers? Probably not. So the attackers press and the defenders drop and it leaves big space.
"It doesn't make them a shambles it just makes them a work in progress.
"Three or four years ago you'd have probably said Mikel Arteta's Arsenal is a shambles but it was a work in progress.
"Do we not need to give Manchester United a little bit of credit for taking two points from Liverpool and knocking them out of the FA Cup? There's so much negativity around United. You switch on the TV and it's all ex-Man Utd players just battering them.
"When they press high it's 12-year-old football, when they defend deep it's not the Man Utd way.
"They just need a bit of reality. United are not as bad as everyone is making out."