Both clubs are fighting for the Premier League title but it was domestic up action that was served to their fans this weekend.
Arsenal arrived at the Emirates Stadium off the back of two defeats but were the sharper side in the opening stages.
A flurry of chances fell their way during the first-half but they couldn't take them, with Kai Havertz in particular struggling up front.
Liverpool slowly but surely grew into the game and very nearly took the lead when Trent Alexander-Arnold rattled the crossbar.
Tensions between two of English football's biggest clubs were on full show when Ben White fouled Curtis Jones following his piece of skill.
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The second half in north London was similar to the first, with both sides producing chances but lacking a clinical edge.
However, the deadlock was finally broken ten minutes from time as Liverpool secured their spot in the fourth round.
Alexander-Arnold swung in a dangerous corner from the left, hit the head of Arsenal defender Jakub Kiwior and went in.
Luis Diaz wheeled away in celebration but replays confirmed that the Gunners defender was the man to turn it in.
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Diaz then got himself onto the scoresheet deep in stoppage-time as he rifled his shot into the top-right corner.
Arsenal, the record 14-time winners of the FA Cup, were then finally knocked out of the competition as Liverpool held on.
Post-match press conference: Mikel Arteta (FA Cup: Arsenal 0-2 Liverpool)
That makes it three consecutive defeats in all competitions for them and sees them exit the FA Cup a round earlier than last season.
Liverpool were arguably the deserved winners despite Arsenal's mass amount of chances and will now await Monday's draw.