Seven of the eight goals were scored in the second half. Arshavin put the Gunners head in the 90th minute only for Israeli Yossi Benayoun to equalize for Liverpool in stoppage time.
The tie moved Liverpool into a tie for first place with Manchester United, which plays Portsmouth on Tuesday and has another game in hand.
"They [United] had the initiative before this game. They were already in the driving seat," Liverpool coach Rafael Benitez said. "If they win tomorrow, it will be more difficult for us but they have to win and they also have to play Arsenal. Before we knew we had to win almost every game so it is very disappointing to concede four goals we don't usually concede. But the positive is to score four goals against Arsenal, and the other positive is that the team fought to the end. We will do this until the end of the season."
American co-owners Tom Hicks and George Gillett watched the game together at Anfield -- the first time they've attended a game together this season.
They were in England to meet with officials from the Royal Bank of Scotland, whose massive loan to Liverpool comes due in July.