Cristiano Ronaldo put the Red Devils ahead from the spot midway through the opening period, but Fernando Torres and Steven Gerrard turned the match on its head before the break.
Fabio Aurelio curled home a superb free-kick after Nemanja Vidic capped a dismal display with his second red card of the season against the Merseysiders, before Andrea Dossena lobbed home another in stoppage time.
Cristiano Ronaldo breaks the deadlock from the penalty spot
Sir Alex Ferguson left Dimitar Berbatov on the bench as Manchester United squared up to old rivals Liverpool at Old Trafford this afternoon.
Carlos Tevez, a scorer at Anfield in the last two seasons, replaced the Bulgarian as United tried to stop Liverpool making inroads into their seven-point lead at the Barclays Premier League summit.
Ryan Giggs and Paul Scholes were also among the substitutes for the Red Devils, while Xabi Alonso was not even on the Liverpool bench after suffering a knock against Real Madrid on Tuesday.
Liverpool were forced to make a late change when Alvaro Arbeloa pulled out just before kick-off, leaving Sami Hyypia to take his place.
Jamie Carragher took up the right-back position and was immediately bypassed by Wayne Rooney, who won a corner he took himself that Albert Riera headed away.
United were making a fast start and Tevez raced on to Cristiano Ronaldo's touchline pass, only to overhit his cross.
Ronaldo then fired the ball to Park Ji-Sung, whose fiercely-struck shot was deflected wide by Carragher, who flung himself in the way.
Again United failed to profit from the corner, allowing Liverpool to clear their lines. Fernando Torres thought he should have had a free-kick on the edge of the area when he went down under pressure from John O'Shea and Rio Ferdinand.
Level best: Fernando Torres makes it 1-1 at old Trafford
Referee Alan Wiley decided otherwise, with Torres continuing his protests long after the incidents.
Lucas weaved his way to United's penalty area, only for O'Shea to make a half-challenge that allowed Ferdinand to whip the ball away from Riera.
Martin Skrtel then embarked on a 40-yard run, remaining unchallenged until Ferdinand stepped in. Steven Gerrard's forward burst caused momentary panic in the United box before Nemanja Vidic and Edwin van der Sar combined to scramble a clearance.
Liverpool had got up a head of steam, with Patrice Evra lashing over as United countered.
Torres skipped past Ferdinand brilliantly and was just about to shoot when Vidic came across to make a vital tackle, then Gerrard's delicate free-kick bounced through to Van der Sar after floating over a packed penalty area.
It proved a pivotal intervention as, within a minute, United were in front. Tevez was the orchestrator, threading a pass through for Park.
The South Korean just got to the ball ahead of Jose Reina, whose momentum took Park down. Wiley pointed to the spot and up stepped Ronaldo to provide the confident finish.
Foul play: Steven Gerrard is brought down for Liverpool's penalty
Hyypia got in the way of a Rooney shot as United scented blood, knowing their opponents' lingering title dreams would be over if they did not win.
The visitors needed something to go their way, and it arrived from an unlikely quarter when Skrtel launched a long punt downfield.
Virtually faultless all season, Vidic appeared to have the situation under total control. But instead of simply clearing, he tried to turn towards his own goal, allowing the ball to bounce on and offering Torres a chance to charge.
Vidic still seemed favourite to knock a pass back to Van der Sar. Instead, Torres stuck out a boot, moved the ball away from the Serbian, darted forward and beat the Red Devils keeper with ease.
Torres then went tumbling to the ground in a battle of strength with Vidic, who appeared temporarily unnerved.
Reina reacted quickly to gather the rebound as Tevez closed in after the Liverpool goalkeeper had failed to hold a long-range Ronaldo free-kick that had taken a deflection.
Pen pal: Steven Gerrard's spot-kick puts Liverpool ahead
Carragher was booked for a clear foul on Tevez, with Ferdinand also yellow-carded shortly afterwards after Dirk Kuyt had been sent flying.
Michael Carrick's shot flew just over and two minutes before the break, Evra sent Gerrard flying in the box after Torres had split the United defence and Wiley rightly pointed to the penalty spot.
Van der Sar was booked as he delayed the spot-kick. But it did not put Gerrard off as he found the bottom corner.
Feeling fab: Liverpool's Fabio Aurelio celebrates after scoring
There was an urgency about United's attacking play though and after Reina had turned a Tevez cross behind for a corner, he was again forced to react quickly after dropping Anderson's set piece.
Rooney marginally overhit a pass that would have left Park running at Reina, then Javier Mascherano was booked for the latest in a string of petty fouls.
A Rooney shot was deflected wide, then the England man turned a Ronaldo cross back towards Tevez but the Argentina forward, with his back to goal, could not make contact.
Skrtel was next in the book for a late tackle from behind on Tevez, before mistakes from O'Shea and Ferdinand came one after the other to provide Liverpool with an opportunity to counter-attack, which ended when Lucas fired straight at Van der Sar.
Ferguson resisted the temptation to make a change at half-time, although Evra quickly gifted Liverpool a corner to hint at a second period being no better than the first.
Michael Carrick overhit a pass under no pressure as the hosts' woes continued, although they nearly had a chance when Ronaldo's cross-shot hit a post, Reina diving on the loose ball before Rooney could get there.
Torres limped out of a tackle with Carrick although, thankfully for Liverpool, he soon recovered.
Sealed with a kiss: Steven Gerrard poses for a cameraman after his goal
Lucas brought down Rooney to present Ronaldo with a long-range free-kick which bounced through to Reina.
O'Shea was caught in possession by Riera, which summed up United's performance, Carrick almost putting his side in trouble shortly afterwards with another wayward pass.
Andrea Dossena replaced Riera midway through the second half, with Tevez rolling a shot narrowly wide not long afterwards.
Ronaldo was the off-target with a shot that heralded the introduction of Berbatov, Paul Scholes and Ryan Giggs for Park, Carrick and Anderson.
Yet there was no time for the changes to have any effect as Vidic was soon making his way to the dressing rooms, sent off against Liverpool for the second time this season after a dismal first touch had left him little alternative other than to haul down Gerrard, who would have been clean through.
And that was not the end of United's punishment as Fabio Aurelio strode up and curled a magnificent free-kick into the corner.
Dossena added another in stoppage time, although by then United were resigned to their fate.
Off day: Nemanja Vidic (left) is shown a red card by Alan Wiley as Jamie Carragher watches on