The Reds were impressive in front of their home fans for the first time this season, scoring first through Martin Skrtel in the 34th minute before City struck back for the first time through Yaya Toure.
It was a game which ebbed and flowed with a great atmosphere and the crowd erupted yet again when Luis Suarez struck home a brilliant fee-kick in the 66th minute before Skrtel's poor backpass invited Carlos Tevez to score an 80th minute equalizer for a share of the points.
Steven Gerrard's outswinging free-kick found Skrtel who rose above his marker to hammer home a powerful header from just outside the six-yard box for the opener.
Tevez took on Raheem Sterling down the right and floated a cross into the area which was not cleared properly by Skrtel and Pepe Reina with Martin Kelly spilling the ball at the back post only to see Yaya Toure hook his left-footed effort into the back of the net from close range.
Immediately though, the Reds answered when a free-kick was called for a Jack Rodwell handball (although harsh) with Luis Suarez stepping up to curl a sublime dead ball over the wall and inside Joe Hart's left upright.
With ten minutes remaining, Skrtel made a catastrophic error with his errant backpass towards Reina for Carlos Tevez to chip in and round the Spaniard to slot home his 100th goal in English football.
It was probably a bad result for the Reds who really deserved the win but it just goes to show that City can be well below their best and come up with points on the road.
Anfield, Liverpool - 44,942
Yellow cards:LIV - Luis Suarez 90+4' MC - nil