It was a night filled with big incidents in Lancashire as the Reds skipped away to a two-goal lead before having goalkeeper Alexander Doni sent off and then conceding twice after his replacement Brad Jones came up with a penalty save before giving one away.
Andy Carroll, in his 50th appearance for the club, then came up with the winning goal with a very late header to keep the Reds eighth on the table as Rovers dropped to 18th in a major boost of confidence for the Anfield club ahead of Saturday's FA Cup semi-final against Everton.
It was a barnstorming beginning by Liverpool who were ahead within 13 minutes when Maxi Rodriguez slotted home from close range after Craig Bellamy latched onto a brilliant long ball from Martin Skrtel from his own six-yard box before the Welshman advanced down the right and then slid a pinpoint low cross for the Argentine to open the night's scoring.
Within three minutes, the Reds were two goals ahead when Rodriguez volleyed home his second from the back post after Rovers keeper Paul Robinson had denied Jonjo Shelvey's effort from the edge of the area with Carroll's sliding follow-up bobbling in the air off Grant Hanley and dropping perfectly for Maxi to coolly convert into an open goal.
The match took a slight turn in the 25th minute when Doni, in just his second appearance for Liverpool, was shown a red card for bringing down Junior Hoilett who had intercepted a poor Jon Flanagan backpass. The Brazilian had no choice but to go at Hoilett, who looked to get around him, but his challenge was too heavy on the Rovers winger with referee Anthony Taylor having no hesitation in pointing to the spot.
That required some tinkering from Kenny Dalglish who hooked Flanagan to bring on Australian keeper Brad Jones whose first piece of action of in the Premier League for the club was to deny Yakubu's poorly struck penalty, igniting the visiting Reds fans.
It was a huge letoff for Liverpool but the match soon took another twist when Yakubu made up for his penalty miss by easily nodding home David Dunn's free-kick from the right in the 36th minute to give the home side plenty of hope.
In yet another twist, Blackburn managed to level the score just after the hour-mark when Yakubu managed to convert from the penalty spot after he had been knocked over by Jones. The Reds third-string gloveman took way too much time in clearing a ball which bounced up off Yakubu, who had bore down on him, before the ex-Middlesbrough man spilled the aerial deflection and then made contact with the Rovers striker who picked himself up to slot it down the middle of the goal.
Just as it seemed like it was heading for a draw, Liverpool came up with an extremely late winner when Sebastian Coates played a long straight ball into the area for Daniel Agger to head into the path of Carroll who powered it past Robinson for a famous win.
Dalglish had rested the likes of Steven Gerrard, Luis Suarez, Stewart Downing and Dirk Kuyt whilst starting Jose Enrique on the bench suggesting it was an even bigger win for the Reds as Steve Kean and his Rovers side would be feeling aggrieved to have at least one point slip.
TRIBAL ASKS: Is the type of team-lifting win which could spur Liverpool on to win the FA Cup?
Ewood Park, Blackburn - 23,571
Red cardLIV - Alexander Doni 25'