The Reds produced a solid display against the Gunners but were ultimately undone by Abou Diaby's 71^st minute header as they saw a seven match unbeaten run in the league come to an end.

However, the visitors were left aggrieved deep into stoppage-time when referee Howard Webb refused to point to the spot after Steven Gerrard's free-kick clearly struck the raised hand of Cesc Fabregas. 

It was a disappointing end for Rafael Benitez's men and means they remain fourth in the Barclays Premier League standings, level on points with their next opponents Manchester City, who have two games in hand.

The 'grand slam' clash in the Capital is one of the most anticipated fixtures on the English football calendar and the Reds went into it in buoyant mood following a battling 10-man victory over neighbours Everton at the weekend.

It was one of the team's best displays of the season to-date and so it was no surprise to see Benitez make just the one enforced change to his derby line-up, bringing in Martin Skrtel for the suspended Sotirios Kyrgiakos.

The Slovak is no stranger to the threat posed by Andrey Arshavin et al, but with the Gunners without a win in their last four, perhaps it was as good a time as any for the Reds to continue their rediscovered mean streak.

Indeed, there seemed to be a real feeling amongst the players that a first away win over Arsenal since 2000 could be achieved; a belief that gathered strength when the visitors had the first chance of the match on five minutes.

Gerrard whipped a right-wing free-kick deep into the Gunners area, where the returning Skrtel headed back across goal, only to see Manuel Almunia claim on the stretch via a deflection off Alex Song.

Arsenal responded and went close with an almost identical opportunity two minutes later. The Gunners won a free-kick on the right-hand touchline, allowing Fabregas to send in a delicious cross that the unmarked William Gallas somehow contrived to head over the top from eight yards out.

It was a sign of things to come as spells of cagey midfield possession were interrupted by some inventive approach play by both sides.

On 15 minutes David Ngog held off the challenge of Thomas Vermaelen on the edge of the box, but his shot was too tame and Almunia gathered with ease. Maxi Rodriguez then fired wide when well placed as Liverpool began to ask most of the questions.

At the other end Pepe Reina had yet to be called into action, but was grateful to the awareness of Skrtel on 22 minutes when the defender did well to block Samir Nasri's probing low centre on the stretch.

The Gunners' mantra of pass and move football was neat but they continued to fail in the final third, none more so than on 25 minutes, when Nicklas Bendtner crashed over the near post upright after an incisive ball from Arshavin.

Back came the visitors and after a searching free-kick from halfway caused havoc in the home side's area, Maxi flashed a shot goalwards that was blocked by the arm of Vermaelen. Gerrard led Liverpool's appeals but referee Webb was having none of it.

It would prove to be the hot topic of discussion at the interval as the travelling Kop reflected on a first 45 that the Reds could argue to have shaded.

There had certainly been much to be encouraged by as the second period got underway and Benitez's men looked like building on a solid performance when they raced out of the traps.

Lucas Leiva was the unlikely source of the danger, surging onto Dirk Kuyt's clever pass and crashing a 20 yard attempt just over the bar.

Five minutes later and it should have been 1-0 to Liverpool. A quick-fire break saw Gerrard send Ngog clear. The Frenchman held off one challenge and looked odds on to score until a last-ditch block by Gallas denied him the opener.

The home crowd roared their disapproval, but were a decisive touch away from celebrating just 60 seconds later when substitute Tomas Rosicky failed to take advantage when clear on goal.

The temperature inside the Emirates was on the rise and Bendtner almost benefitted from an outrageous piece of fortune when his attempted pass ricocheted back into his path. The Dane bore down on Reina, but saw his shot well blocked by the Spaniard, with Agger on hand to hack the loose ball to safety.

With Arsenal's attack moving up the gears, the Reds suffered a blow just shy of the hour mark when Jamie Carragher limped off to be replaced by Philipp Degen.

Sensing a weakness in the Liverpool rearguard, the hosts pressed and Reina showed why he is regarded as one of the best 'keepers in the world when he dived full length to keep out Rosicky's 25 yard rocket.

However, there was nothing the Reds stopper could do to deny the Gunners on 71 minutes, when Diaby rose unmarked to guide Rosicky's pinpoint centre into the net from six yards out.

Liverpool pressed late on and substitute Ryan Babel was a lick of paint away from snatching the equaliser on 85 minutes, when his fizzing strike was flicked onto the bar by Almunia.

Maxi then saw a shot on the turn easily stopped by the Spaniard before Fabregas got away with a blatant handball in stoppage time, as Arsenal held on to claim the narrowest of triumphs.