But in a goal fest of a second period seven goals were scored as both teams had to settle for a point, with the Gunners thinking they had clinched victory in the final minute only for Liverpool to respond immediately.
The Reds now lead the Premiership on goal difference from Manchester United who have the comfort of two games in hand.
Fernando Torres restored parity early in the second half and Yossi Benayoun then quickly put the home side ahead.
Arshavin brought Arsenal level on 67 minutes and claimed his hat-trick just three minutes later as the visitors got their noses in front again.
Torres responded for Liverpool with his second of the night to make it 3-3 with 18 minutes remaining.
Despite Liverpool pushing for a winner it seemed as if that was to be the final score as the game entered injury time.
Arsenal broke quickly and the Russian playmaker got his fourth of the night and all three points seemed to be heading for North London.
But, in a fitting climax to a pulsating encounter, Liverpool immediately attacked the Gunners goal and Benayoun scrambled the ball over the line.
Liverpool skipper Steven Gerrard, who missed the game through injury, told Sky Sports: "They (Man Utd) have a fantastic team and you look at their run-in, look to see where they are going to drop points.
- it would have been very difficult if we'd lost the game.
"I think that point could be big"
Gerrard added: "It's not like us to concede that many goals like we have tonight. We're normally sound defensively, especially at home."
"We'll have to wait and see how big that point could be for us.
"Performance-wise, at times we were very good. Torres and Benayoun were frightening going forward.
"Now we need United to get beaten which is difficult to do because they're a good team. But there are still twists and turns left."
Reds boss Rafael Benitez was disappointed to have conceded four goals.
"I think that today we made too many mistakes with the four goals, but it was also very positive because the team showed character until the last minute and we never gave up so that's a positive message for the rest of the season.
"We have one more point against a good team and we are top of the table.
"We were talking before about having to win almost every game, so today I was disappointed. To score four goals is good, but to concede four goals is really disappointing.
"We have to keep pushing and we showed today again that until the last minute we are prepared to fight so we will try to do that until the last game."