It was the defenders who did the damage as Mathieu Flamini, Kolo Toure and William Gallas all got on the score sheet as they condemned the visitors to their fifth consecutive away league defeat.
The Merseysiders are now 14 points behind leaders United and, with just one away league goal this season, it now seems impossible they will end their 17-year wait to win the title.
The victory was also of massive importance to Arsenal, who still remain 10 points behind leaders Manchester United despite jumping into third place on the league table.
Kolo Toure pounces
Both sides had the ball in the net early, only to have the celebrations of Robin Van Persie and Peter Crouch both halted by the assistant referees flag.
But Arsenal finally had their goal when Flamini took advantage of a delightful Cesc Fabregas pass to score the opener.
On 54 minutes, a lack of urgency in the Liverpool defence allowed Robin Van Persie ample time to regather the ball and slip a pass to Toure as the Ivorian scored his first goal of the season.
Gallas completed a miserable day for Liverpool, who finished with Gerrard arguing with John Arne Riise, when he punished terrible marking to head home Fabregas's free-kick in the 79th minute.
In Sunday's earlier match, Reading ended their run of five straight defeats with a surprising come from behind 3-1 victory over Tottenham.
Irish striker Robbie Keane put the visitors ahead in the 24th minute when he converted a penalty but it all went wrong for Martin Jol's men after that.
Reading were ahead at the break after goals from Nicky Shorey on 38 minutes and Steve Sidwell in the dying minutes of the first half.
|Nick Shorey gets Reading started|
Kevin Doyle wrapped up the three points with 11 minutes left on the clock to bring Tottenham back down to earth after last weekend's victory over Chelsea.
The result at the Madejski Stadium, boasting a record 24,000 crowd, lifted Reading into 11th, one place above Spurs who arrived here on a 10-match unbeaten run.
A furious Martin Jol questioned his side's character immediately following the defeat.
"At half-time we wanted to put it right but you need personality and character," the Dutchman said.
"It's frustrating, you get angry a bit as well because you can do all the hard work and prepare yourself well.