Dirk Kuyt's hat-trick ensured the Premier League title race remains wide open as Liverpool swept Manchester United aside at Anfield.
Sir Alex Ferguson may have been encouraged by Arsenal's failure to beat Sunderland on Saturday and the opportunity to extend their lead at the top of the table - but this ended as a day of abject misery for United as they slumped to their second successive defeat.
United's twin setbacks, with this loss following hard on the heels of defeat at Chelsea, mean they remain only three points ahead of Arsenal, with Arsene Wenger's side having played a game less. Kuyt was the hero as he struck the first treble by a Liverpool player against United since Peter Beardsley in 1990 and he found a willing and outstanding accomplice in £23m Uruguayan Luis Suarez.
Suarez's stunning sleight of foot took out three United defenders and set up a simple opener for Kuyt after 34 minutes and it was also Suarez's cross that Nani inexplicably headed into the Dutch striker's path for the second goal just before the interval.
Nani was a central figure in shameful scenes right on half-time. He was felled by a crude challenge by Jamie Carragher that eventually required the Portuguese winger to be stretchered off, with Liverpool and United players confronting each other in the angry aftermath of the incident.
This was followed by Rafael's reckless tackle on Lucas and more confrontation - a passage of play that saw referee Phil Dowd exercise extreme leniency in not sending off both Carragher and United's Brazilian defender.
Kuyt got his and Liverpool's third after 65 minutes when Edwin Van der Sar failed to hold the dangerous Suarez's free-kick.
The three-goal cushion allowed Dalglish to give striker Andy Carroll a late run-out for his debut following his £35m move from Newcastle United.
Javier Hernandez pulled a goal back for United in injury time but this will have been of no consolation to Ferguson after 90 minutes in which the Premier League pace-setters - admittedly robbed of the towering defensive figures of injured Rio Ferdinand and suspended Nemanja Vidic - looked vulnerable and overpowered in all areas.
For Liverpool boss Dalglish, this was the perfect belated present after he celebrated his 60th birthday on Friday and only increased the strength of his claims to land the manager's job on a permanent basis, with that eventual appointment surely nothing more than a formality.
Liverpool were able to put Carroll on the bench for the first time since his move from Newcastle, a decision perhaps encouraged by the absence of Ferdinand and Vidic from United's defence.
But it was Suarez who was a constant source of threat to United, almost pouncing in the second minute when he arrived unmarked on the end of Kuyt's cross but he was unable to control his finish and United escaped.
Liverpool's brisk start prompted United into a response and keeper Pepe Reina was grateful to see Dimitar Berbatov's dipping long-range drive glance off the outside of the post as he scrambled across his goal.
Dalglish had to reshape his defence after 25 minutes when the injury-prone Fabio Aurelio went down clutching his hamstring and was replaced by Sotirios Kyrgiakos. The Greek moved to partner Martin Skrtel in central defence, with Carragher moving to right-back and Glen Johnson to the opposite flank.
And as Liverpool reorganised they were almost punished but Raul Meireles was able to smuggle Wes Brown's header off the line following a corner.
Suarez's quick feet inside the area always threatened to cause havoc and so it proved as Liverpool took the lead after 34 minutes. United's defenders, in the shape of Rafael, Michael Carrick and Brown, collapsed like a house of cards as the Uruguayan weaved his way towards goal.
He prodded the ball past Van der Sar towards goal and Kuyt ran in to make sure from a matter of inches as United appealed in vain for offside.
A calamitous piece of defending from Nani gift-wrapped Kuyt his and Liverpool's second five minutes later. Nani rose to meet Suarez's cross in the area, only to succeed in directing it perfectly into the path of Kuyt in the six-yard area for a simple headed finish.
There was an ugly end to the half when both Carragher and Rafael were fortunate to escape with only yellow cards for awful challenges. Carragher's cynical touchline lunge on Nani prompted a flare-up between players from both sides before the winger was stretchered off.
And as tempers continued to boil Maxi Rodriguez made a thigh-high, studs-up lunge on Rafael, who immediately took out his frustrations on Lucas with a wild tackle. Once again it prompted unseemly exchanges before referee Dowd attempted to restore some sort of order by booking the United defender, while Rodriguez went unpunished.
Hernandez replaced the stricken Nani and United almost worked their way back into contention only for Meireles to clear Berbatov's header off the line early in the second half.
Meireles then showed his attacking qualities with a perfectly timed run on to Kuyt's pass only to be denied by Van der Sar.
But the United keeper was at fault as Liverpool extended their lead and Kuyt completed his hat-trick after 65 minutes. Suarez's free-kick was low and awkward but Van der Sar should have held on - and once he fumbled - Kuyt completed the formalities with a poacher's finish.
As The Kop revelled in Liverpool's victory and United's discomfort, Dalglish felt able to introduce Carroll for his debut and the striker received a rapturous reception around Anfield.
Liverpool cruised home and even the sight of Hernandez scoring deep into stoppage time could not stop wild celebrations sweeping around Anfield at the final whistle.