Dirk Kuyt secured a point for the Reds with a penalty after 10 minutes of injury time - just moments after Robin van Persie's own spot-kick had looked enough for victory.
The Gunners are now six point points behind leaders Manchester United having played the same amount of games.
They had plenty of possession and hit the bar in the first half through Laurent Koscielny, but were unable to make their dominance count until deep into stoppage time when Van Persie crashed home a spot-kick for Jay Spearing's foul on Cesc Fabregas.
However, Liverpool - who had earlier seen captain Jamie Carragher carried off with concussion - snatched a point with the final kick of the match after Emmanuel Eboue had pushed Lucas.
While the match ended in high drama, before kick-off there was a minute's silence in memory of late Arsenal director Danny Fiszman, who passed away following a battle against cancer and also remembering the 96 Liverpool supporters who died 22 years ago this week in the Hillsborough tragedy.
The sale of Fiszman's holding in the Gunners' parent company led to American Stan Kroenke crossing the takeover threshold, but it remains to be seen whether the Denver-based entrepreneur will be able to complete his proposed £730millon buyout.
When the action got under way, Arsenal - unbeaten in 14 matches and yet to lose in 2011 - started well, with Abou Diaby glancing a header wide from Samir Nasri's curling free-kick.
Arsenal were careless in possession far too often, with Liverpool quick to capitalise on the break. The hosts sparked into life, though, after 12 minutes when Theo Walcott stung Pepe Reina with a fierce 25-yard drive which the Reds keeper spilled and van Persie hooked the loose ball back across an open goal, which was headed behind.
From van Persie's right wing corner, Laurent Koscielny got up above the Liverpool defence and in front of Reina to crash a header against the bar.
Liverpool were forced into a change on 21 minutes when full-back Fabio Aurelio limped off with a recurrence of his hamstring problem, replaced by 17-year-old Jack Robinson for a second senior appearance.
Luis Suarez's slip allowed van Persie and Cesc Fabregas to open up the Liverpool defence, but the Arsenal skipper drilled his 20-yard shot wide.
Liverpool were being pegged back, with Walcott firing a low ball in from the right which was booted behind. It continued to be one-way traffic with Liverpool defending deep, but Arsenal could not find a telling pass in the final third. In first-half stoppage time, Eboue's angled drive at the near post was deflected across the face of goal and away.
It was again a bright opening by Liverpool after the restart. Suarez created space for himself at the edge of the Arsenal penalty area, but dragged his shot wide.
There was a scare for the visitors when Andy Carroll went down after twisting his knee and ankle when challenging for a loose ball in the box. After some treatment, though, the £35 million England man was back in the action.
Reds skipper Carragher then appeared to have been knocked unconscious after a clash of heads with John Flanagan, sparking more anxious scenes on the visitors bench as the medical staff from both teams attended.
The former England defender was eventually carried off on a stretcher, his neck in a brace and given oxygen. Sotirios Kyrgiakos came on as a substitute.
With 20 minutes left, Carroll was replaced by Jonjo Shelvey before Arsenal made a double change when Jack Wilshere and Walcott were replaced by Nicklas Bendtner and Andrey Arshavin, the Russian making his 100th appearance for the Gunners.
Wojciech Szczesny got down well to beat away an angled shot from Suarez as Liverpool looked to snatch all three points.
Reina made a decent block when van Persie was played into the left side of the Liverpool area, before at the other end, Suarez spooned his shot high and wide in space at the near post.
Because of the injury to Carragher, there were some eight minutes of stoppage time, and just when that seemed to be running out, Fabregas went tumbling over Jay Spearing's leg and this time, the referee pointed to the spot.
Van Persie stepped up to send Reina the wrong way and seemingly keep Arsenal in the title hunt. However, there was more late drama after Alex Song tripped Lucas right on the edge of the area.
Suarez's free-kick went into the wall, but Eboue then pushed over Lucas to conceded another stoppage-time spot-kick which Kuyt dispatched.
It proved the last action of an amazing end to the game, which leaves Arsenal all but out of the title race and left a dejected Arsene Wenger confronting the officials - and opposite number Kenny Dalglish as they walked off.
After the match, Arsene Wenger said he felt Arsenal were out of luck again after dropping two costly points in their battle to stay in the Premier League title race.
"We conceded a penalty after 11 minutes when the referee said there was eight minutes of injury time. I don't see where those three minutes came from and it was no penalty,'' lamented the Gunners boss, who confronted referee Andre Marriner and his assistants as they left the pitch.
"We have been badly done in the two games here. Against Sunderland we scored a regular goal and were not given a penalty that was 100%, then today we got caught back like that. It is a period where we have not the biggest luck, that's for sure.''
Wenger continued: "We dropped two points. It was a difficult game against a Liverpool team who basically only defended.
"Maybe we are a bit jaded physically. You could see that some players have played 45 minutes and maybe we lack a change of pace, but we tried very hard. The players are very disappointed. Who wouldn't be?
"It is about us winning our games. The hope is always there but, to keep the hope alive, it is up to us to win our games and to win our next game.
We are on a 15-game unbeaten run, but recently we have not taken enough points. Now we must give everything until the last game of the season and see if it is our year or not.''
For Reds boss Kenny Dalglish, there was a sense of satisfaction after a battling display which built on the 3-0 home win over Manchester City as they chase down a Europa League spot.
"I don't think there's any team anywhere that's shown the same attitude and commitment that our team showed there today,'' said the Scot.
"Losing Fabio Aurelio early on, putting a 17-year-old on at left-back, losing our captain, having a right-back at only 18 with his second game, we have lost our centre-forward, we've lost a goal and eight minutes into injury time they still didn't want to accept that we're going to get nothing from the game.
"You can't speak any higher about them than that.''
Andy Carroll limped off after an awkward fall in the second half, but the £35 million striker is expected to recover quickly. Dalglish said: "He just came off as a precaution. He jarred his knee.
"Andy has done fantastically well to get where he is through his rehabilitation when he signed for the club. It was wiser to take him off. We have got a few games left to play and we'd like him available for them. It was just a precaution.''
Dalglish maintained there was no reason to feel down that Liverpool's great rivals United were closing in on a record 19 domestic titles.
"Sadness? In my eyes we are still the best club in English football, if not world football, so I am not very sad at that,'' he said. "The surprise is that they [Liverpool] have not won the title for a long time - that is the surprise. But it's not sadness - it's just a fact of life.
"They never acquired enough points in any season since 1991 to win it. They came close a couple of years ago when Rafa [Benitez] went close, had a fantastic record against the so-called top four, but just couldn't get it over the line.''
Dalglish added: "It will be fantastic to get back there, but you need to hit the standards other teams have set. That is four games - United, [Manchester] City, Arsenal and Chelsea. We only dropped two points and that was today.''
Source: ESPN Soccernet on 17 Apr 11
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