Scholes, who played for United throughout his whole career and won 11 Premier League titles, says the club need to sign five top players to arrest their current slump that saw them fail to qualify for the Champions League last season.
United finished seventh in the Premier League in May, having won the trophy the previous year, and began the latest campaign under new manager Louis van Gaal with a disappointing 2-1 home defeat to Swansea City on Saturday.
"I am scared for United. Genuinely scared they could go into the wilderness in the same way Liverpool did in the 1990s," Scholes said in the Independent newspaper on Thursday.
"What do they need Five players. Five proper players who can hit the ground running and turn round a situation that looks desperate. Let me be clear: I am sick of having to criticise the club to which I gave my life as a footballer. But United need to arrest their decline."
The defeat by Swansea shredded the close-season optimism that had been circulating since former Netherlands boss Van Gaal was chosen as the permanent replacement for David Moyes, who was sacked after just 10 months in the role.
With many pundits claiming United's squad needs a root-and-branch overhaul, the club have so far struggled to make a major splash in the transfer market this window.
While some of the world's best players have been linked with United, only left back Luke Shaw, midfielder Ander Herrera and defender Marcos Rojo have been recruited to date.
United will get the chance to get points on the board when they play Sunderland away on Sunday.