Luiz Felipe Scolari's men have moved into a quarter-final meeting against Colombia without being particularly impressive at their home tournament.
And Dunga - who managed Brazil at the 2010 World Cup and captained the country to glory at USA 1994 - feels there is room for improvement.
"Brazil are winning and in the quarter-finals, which is the most important thing," the 50-year-old told Marca .
"But it is true that their performances have not been consistent and we have not seen the Brazil we all know.
"As long as they are getting through the play-offs, there is time for progress to be made."
Despite being underwhelmed by Brazil's performances as a whole, Dunga was full of praise for star forward Neymar, who has scored four goals at the tournament so far.
Dunga believes the 22-year-old has been given freedom by Scolari, allowing him to shine more than he does for club side Barcelona.
"Neymar is very important for Brazil. He is very focused, playing well, scoring goals," he added.
"It's very important for a player of his level, not just to play well and create opportunities, but also to finish actions and score goals, that makes the difference.
"There's a big difference between the Neymar of Brazil and that of Barca. Neymar's way is to dribble the ball and go in and attack the opposition, and Barca's is one-touch football.
"So, Neymar in Barcelona, playing the ball, is like any other player. When it comes to the national side, though, Neymar has his freedom and it brings out the creativity he has."
