Arsenal surged back to the top of the Premier League thanks to BUKAYO SAKA'S cool-headed penalty kick winner, which also ended Liverpool's title chances under Jurgen Klopp.
The English winger, who lost the penalty shootout in the Euro Final, scored twice in a fast-paced, exhilarating game to give the Gunners a 14-point advantage over the struggling mid-table visitors.
With the score at 2-2, Klopp substituted Mo Salah, and Trent Alexander-Arnold took a beating from Gabriel Martinelli before being replaced himself at halftime, leaving Liverpool with only two victories from their first eight league games.
This was a victory for Arteta, whose team had taken the lead through Martinelli in the opening minute and recovered it through Saka in the closing second of the first half.
And even if Roberto Firmino somehow created a second equalizer for the visitors, despite Liverpool having the best of the first half and leveling via Darwin Nunez, Arsenal took control after the interval.
Arteta's club has established themselves as the most probable rivals with back-to-back home victories over Spurs and Liverpool, but Manchester City, who are propelled by Erling Haaland's never-ending supply of goals, remain the clear favorites to win the championship.
While the decisive penalty was debatable, the manner in which Arsenal won it after surviving Liverpool's first-half domination was very promising for their boss. The Emirates throbbed throughout a riveting Premier League classic.
Since Klopp took over as manager, Arsenal have only defeated the Reds once in their previous 17 attempts.
Takehiro Tomiyasu was unexpectedly chosen by Arteta to play left back instead of Kieran Tierney, and the Japanese defender successfully restrained Salah. Klopp continued with the 4-2-3-1 configuration used in the resounding midweek victory against Rangers.
But with a perfect, quick play, Arsenal took the lead in 58 seconds, seemingly buoyed by their early-season confidence.
When Odegaard's lovely angled ball was received, Martinelli responded with a cool first-team finish after Saka sprinted down the right and squared for him.
Positionally, Alexander-Arnold once again fell short, but Kostas Tsimikas, another full-back, also struggled.
Although they had only previously lost one of those instances, Liverpool have now let up the first goal ten times in 12 Premier League games.
However, when Gabriel raised his arm at Jota, Klopp's team believed they should have been awarded a penalty. Ref Michael Oliver and VAR Darren England likely determined that the Arsenal defender was too near to take evasive action.
As a result of a collision with Martinelli, Alexander-Arnold seemed to injure his right ankle.
Whether or not this would have caused any panic for England boss Gareth Southgate - who loves a right-back and had just lost Kyle Walker to injury - is open to conjecture, but the Liverpool man continued until the break.
Liverpool were beginning to look like their old selves and Nunez had a snap-shot pushed away by Aaron Ramsdale before the Arsenal keeper was forced to save from his own defender when Saliba intercepted a Nunez centre.
Salah’s dribble took out three defenders before he dragged a shot wide.
So Liverpool’s equaliser was certainly well signposted before it arrived on 34 minutes.
Alexander-Arnold’s long ball found Nunez, who fed Diaz then surged into the six-yard box to poke home the Colombian’s low centre.
It was the Uruguayan’s first goal since the opening day of the season but just when it looked as though the momentum was fully with Liverpool, the wheels came off.
First Diaz was forced off through injury and replaced by Roberto Firmino and then, in the fifth minute of first-half injury-time, Arsenal swept forward and regained the lead.
Jesus won the ball deep in his own half and Martinelli surged forward, teased poor Alexander-Arnold and delivered a low centre which Gabriel Margalhaes dummied and Saka tucked away at the back stick.
While the Liverpool right-back had suffered a nightmare against Martinelli, he probably should have been withdrawn with his ankle injury - a decision which Klopp eventually made at half-time, sending on Joe Gomez.
It was a sickening time to concede for the visitors and Arteta’s men began the second half with a voracious appetite for a third.
They attacked in waves, with Odegaard shooting straight at Allison but the first time Liverpool went forward in the second half, they levelled again.
Jordan Henderson picked out Jota, whose pass wrong-footed William Saliba and fed Firmino, who shot inside the far post, beating the flailing dives of Gabriel and Ramsdale.
There were worrying scenes when Jesus was floored by a stray elbow from Tsimikas but the Arsenal striker eventually continued and VAR cleared the Liverpool left-back.
With Arsenal on top, Klopp changed back to a 4-3-3 as Fabinho replaced Salah, Ibrahima Konate also on for Joel Matip.
After an almighty goalmouth scramble, Oliver pointed to the spot when Thiago Alcantara caught Jesus as he attempted to clear.
It was soft but the more junior VAR England was never going to overrule Oliver and, after a fracas between Granit Xhaka and Henerson, Saka thudded his spot-kick past Alisson.