Hull City's improvement under new manager Marco Silva continued with victory over an out-of-sorts Liverpool side who lost further ground on leaders Chelsea at the top of the table.
Debutant Alfred N'Diaye gave the home team a 1-0 lead at half-time following a goalkeeping error by Simon Mignolet, while Oumar Niasse sealed the win to move the Tigers within a point of fourth-bottom Swansea.
Liverpool dominated possession and had over three times as many attempts on goal, but lacked the cutting edge in the final third of the field that had been so evident in the first half of the season.
The defeat was Jurgen Klopp's side's fourth in their last five matches in all competitions, while a fifth consecutive Premier League game without a win meant the club dropped out of the top-four after Manchester City beat Swansea on Sunday.
The Reds went into the match with the chance of reducing Chelsea's lead at the top of the Premier League back to 10 points after the 2015 champions had beaten third-place Arsenal 3-1 in the lunchtime kick-off.
They were boosted by the return to the starting line-up of Sadio Mane after he had represented Senegal in the African Cup of Nations, but faced rejuvenated opposition in the face of Hull City who had won their previous three home games.
The Tigers handed debuts to midfielders Kamil Grosicki and Alfred N'Diaye, while defender Andrea Ranocchia made his first start for the club after coming on as a substitute in Wednesday's 0-0 draw against Manchester United at Old Trafford.
Despite the reinforcements to the home side's line-up, it was Liverpool who started the match as the brighter team but they were unable, for the most part, to convert their superior possession into clear-cut chances.
Referee Lee Mason was called into the action as early as the 17th minute when Philippe Coutinho's speculative strike from 20 yards was blocked by the hand of Andrew Robertson but was not deemed to have been deliberate.
Coutinho then found himself in a more promising position minutes later when Eldin Jakupovic fumbled Roberto Firmino's cross into his path, but the goalkeeper made amends by smothering himself at the ball to block the Brazilian's effort from 12 yards.
Hull were proving to be dangerous on the counter-attack and, after successfully managing to weather a Liverpool storm, took the lead on the stroke of half-time through N'Diaye's first goal in English football.
The Tigers twice caught Liverpool in possession in the lead-up to a Kamil Grosicki corner, from which N'Diaye slotted home from five yards after Simon Mignolet, under pressure from Abel Hernandez, had palmed the ball straight into his path.
The pattern of the match continued after the break, with Liverpool having the majority of the possession but still unable to beat an inspired Jakupovic in the Hull City goal on numerous occasions.
Adam Lallana's inswinging cross, intended for Sadio Mane, was headed towards goal by Robertson but Jakupovic was on hand to claw the ball away as it looked set to loop into the top corner.
Hull continued to create chances on the counter-attack and a move that started deep inside their own half ended when Grosicki played Hernandez through on goal but the Uruguayan was duly smothered by Mignolet.
The Reds started to raise their intensity as the game passed the hour-mark but the equaliser still proved elusive, despite James Milner having an effort cleared off the goal-line by Harry Maguire and Phillipe Coutinho skewing the rebound wide from six yards.
As Liverpool started to commit more players forward in an attempt to draw level, they left gaps at the back and these were ruthlessly exposed when Oumar Niasse sealed the win with six minutes remaining.
Mane was tackled by Robertson on the edge of the Hull penalty area before Andrea Ranocchia's long-ball forward sent Niasse through on goal with only Mignolet to beat and he calmly slotted home from 15 yards.
There was still time left for Jukopovic to pull-off one final stunning save, this time from Jordan Henderson whose effort from over 20 yards arrowed towards goal but the Swiss stopper tipped the ball wide at full-stretch.
The clean sheet, which was Hull City's first at the KCOM Stadium this season, capped a wonderful afternoon's work for Marco Silva, whose team have now won four consecutive games at home since he took charge.
Having looked certainties for relegation at the beginning of January, the Yorkshire side now seem reenergised since the Portuguese, who has signed seven new players, took over as manager.
The Tigers executed their game plan on Saturday to perfection, which involved soaking up Liverpool possession and breaking on their opponents quickly to expose weaknesses that have been found in The Reds' defence all season.
The result left Hull just a point away from climbing out of the relegation zone, while Swansea's last-gasp defeat to Manchester City means even a draw in their next match away to Arsenal would propel Silva's team out of the bottom-three.
It proved a case of deja vu for Liverpool, whose win over League Two Plymouth stands alone as their only victory in 2017 despite once again dominating possession but ultimately falling short for the ninth time in 10 matches.
The performance will raise further questions about the club's defence and goalkeeper, with Lucas Leiva and Joel Matip finding themselves exposed from a ball over the top for Niasse's goal after Mignolet had already been at fault for N'Diaye's opener.
Jurgen Klopp's side were too predictable at times for a well-drilled Hull outfit and lacked the cutting edge that had been provided earlier in the season by the likes of Roberto Firmino, Philippe Coutinho and Adam Lallana.
The Reds, who are now 13 points behind Chelsea having dropped to fifth in the table, return to action on Saturday evening when they play second-place Tottenham Hotspur at Anfield.