Liverpool's 68-game unbeaten run in the Premier League at Anfield came to a stunning end as Ashley Barnes's late penalty earned struggling Burnley a 1-0 win on Thursday.
Jurgen Klopp's men have now failed to win in five consecutive league games to see their title defence collapse as they remain six points behind leaders Manchester United in fourth.
Burnley began the game just one place above the relegation zone, but gave their chances of beating the drop a huge boost when Barnes was tripped by Alisson Becker seven minutes from time and then beat the Brazilian from the spot.
Liverpool had not tasted a league defeat at Anfield since April 2017.
Since then the Reds have ended a 30-year wait to win a league title, but their chances of repeating that feat are fading rapidly after a disastrous run over the past month.
Despite a host of defensive injuries, it has been scoring goals that has cost Liverpool of late as they failed to score for a fourth straight league game.
Klopp reacted to Liverpool's longest Premier League goal drought for 16 years by dropping top scorer Mohamed Salah and Roberto Firmino to the bench.
But Divock Origi underlined why the champions have been reliant on their habitual front three when he smashed off the underside of the bar when one-on-one with Nick Pope midway through the first-half.
The Belgian has scored a number of important goals in big games for Liverpool, most notably netting twice in a 4-0 Champions League semi-final win over Barcelona two seasons ago. But Origi has scored just one league goal since December 2019.
Salah and Firmino were introduced to partner Sadio Mane early in the second half, but Burnley held out despite incessant Liverpool pressure.
Pope saved brilliantly from Salah at his near post before Firmino showed why he has struggled for goals all season by slicing horribly wide from Andy Robertson's inviting cut-back.
Burnley had scored just once themselves in their last four games.
But Sean Dyche's men took advantage of indecision in the Liverpool defence when Alisson upended Barnes, who coolly slotted home Burnley's first penalty of the season.
Ben Mee was responsible for Origi's big chance with an underhit backpass, but the Burnley captain's return from injury in November has restored the Clarets' robust defensive unit that has kept them in the top flight for five seasons despite limited resources.
And Mee ensured the visitors held on for a first win at Anfield since 1974 when he diverted another Firmino effort off the line in the final minute.
After Sunday's 0-0 draw with United, Klopp claimed Liverpool's focus had to be on a top-four finish and Champions League qualification rather than the title given their current form.
The champions could find themselves down in seventh by the time they are next in league action.
After a daunting visit to Manchester United in the FA Cup on Sunday, Liverpool face five of the top seven in their next six league games, starting with a trip to Tottenham next Thursday.