Roberto Mancini's men fight back to earn point but face uphill struggle to catch Manchester United
Edin Dzeko scored from close range to give the champions the lead, but the Reds hit back with two long-range strikes from Daniel Sturridge and Steven Gerrard.
Brendan Rodgers’s men looked on course for victory, but Sergio Aguero scored from a tight angle with 12 minutes of normal time remaining to take advantage of a mistake by Pepe Reina.
Liverpool stay seventh and will be buoyed by a performance in which they enjoyed the lion’s share of both the possession and chances.
City, on the other hand, need rivals Manchester United to collapse between now and the end of the season.