Neil Mellor scored with a blistering finish deep in injury time as Liverpool stunned Arsenal at Anfield.
Xabi Alonso gave Liverpool the lead, drilling the ball home after collecting a superb pass from Steve Gerrard.
Patrick Vieira equalised against the run of play after an hour, lifting the ball over Chris Kirkland to finish a superb flowing move.
But with virtually the last kick of the game Mellor drilled the ball past Jens Lehmann from 25 yards.
Arsenal, who went into the game with only one win from their last eight games in all competitions, remain five points behind leaders Chelsea as the defence of their Premiership title continues to founder.
Arsene Wenger's team struggled to assert themselves for long periods of the game, outplayed by a team that showed more desire and fluency, despite their injury problems.
The Reds went into the game with inexperienced duo Mellor and Florent Sinama Pongolle leading the attack but they packed the midfield and stymied their often-breathtaking opponents.
Gerrard, playing his first game at Anfield since his return from injury, orchestrated most of their attacking moves as the home team made the early running.
Liverpool had a strong penalty appeal turned down in only the third minute.
Gerrard made a surging run into the Arsenal penalty box and went down after Kolo Toure put a leg out as the midfielder ran past him at pace.
Referee Alan Wiley waved play-on, with replays suggesting he was unsighted at the moment of contact.
Alonso shot wide from long range, Mellor hit the crossbar - although his effort was incorrectly ruled out for offside - and Harry Kewell forced Jens Lehmann into action with a far-post header as the Reds pushed forward.
And with half-time looming the Reds' first-half endeavour was rewarded with a stunning goal.
Alonso ran on to an exquisite pass that Gerrard delivered with the outside of his right foot and buried his shot past Lehmann from 20 yards.
Liverpool continued to press and harry the under-par Gunners after the break, while Arsenal struggled to impose themselves on the game.
Alonso gave Liverpool the lead
The Gunners' key players saw little of the ball and when it did come their way they were soon surrounded by red shirts.
But after being outplayed for an hour, Arsenal equalised with a goal of sublime simplicity.
One-touch football from Vieira, Thierry Henry and Robert Pires unlocked the Liverpool defence and when the Arsenal skipper collected the final decisive pass he kept his nerve to dink the ball over the advancing Kirkland.
Arsenal enjoyed more of the ball after equalising and brought on Robin van Persie, while Antonio Nunez made his debut as a replacement for Sinama Pongolle.
Vieira was lucky to escape a second yellow card after a blatant dive went unpunished by the referee but he was superb after the break, breaking up a lot of Liverpool's attacking moves.
Gerrard forced a save from Lehmann in the latter stages but the game seemed to be heading for a draw before Mellor's stunning strike left Arsenal beaten.
Liverpool: Kirkland, Finnan, Hyypia, Carragher, Riise, Gerrard,
Alonso, Hamann, Kewell, Mellor, Sinama Pongolle (Nunez 69).
Subs Not Used: Dudek, Diao, Biscan, Warnock.
Goals: Alonso 41, Mellor 90.
Arsenal: Lehmann, Lauren, Toure, Campbell, Cole, Ljungberg,
Vieira, Fabregas, Pires, Reyes (Van Persie 67), Henry.
Subs Not Used: Flamini, Senderos, Almunia, Hoyte.
Booked: Vieira, Henry.
Goals: Vieira 57.
Ref: A Wiley (Staffordshire).