A blistering four-goal blitz inside the opening 20 minutes from Liverpool effectively put the game beyond Arsene Wenger's side.
Martin Skrtel scored twice in the opening 10 minutes to put Liverpool in firm control and further strikes from Raheem Sterling and Daniel Sturridge gave the home side an unassailable 4-0 lead before half-time.
Sterling netted the fifth goal early in the second half with Mikel Arteta's penalty the only blot on Liverpool's copybook in what was a perfect day for Brendan Rodgers' side as they enhanced their top four aspirations and dented Arsenal's title bid.
Liverpool came racing out of the blocks and hit the front in the very first minute when Steven Gerrard whipped in a free-kick and Skrtel, unmarked inside the six-yard box, bundled the ball home past Wojciech Szczesny with his knee.
The home side continued to pour forward in the opening exchanges and Szczesny did well to block Jon Flanagan's shot after Sturridge picked out the full-back's run into the penalty area.
Liverpool had rattled Arsenal and they doubled their lead on 10 minutes when Gerrard floated over a corner and Skrtel produced a superb header into the top corner over the jumping Alex Oxlade-Chamberlain on the line.
Liverpool looked dangerous every time they went forward and Sturridge should have made it 3-0 on 12 minutes when Luis Suarez sent him clear on goal with a brilliant pass, but the striker chipped his effort wide of the target.
A minute later Liverpool were inches away from netting a third as a corner fell to Suarez fully 30 yards from goal and he drilled in a shot which smashed off the post and from the rebound Kolo Toure stabbed wide with the goal at his mercy.
Arsenal created their first chance of the game on the quarter hour mark when Per Mertesacker got on the end of Santi Cazorla's corner only to flash his header across the face of goal.
Liverpool got the third goal their dominance deserved on 17 minutes when Jordan Henderson robbed Mesut Ozil on the halfway line and he fed Suarez out wide. The Uruguayan picked out Sterling with a perfect pass to give the winger a simple finish at the far post.
Things got even better for Liverpool three minutes later Philippe Coutinho found Sturridge's run with a perfectly-weighted ball in behind Laurent Koscielny and the striker coolly slotted home past a stranded Szczesny.
Liverpool picked up where they left off at the start of the second half and made it 5-0 on 52 minutes when Sterling broke the Arsenal offside trap to race clear on goal from Toure's pass and, after seeing his initial effort saved by Szczesny, the winger was able to slot home at the second attempt.
Sterling almost grabbed his hat-trick three minutes later when the ball dropped to him in the box from Gerrard's free-kick, but the winger stabbed his effort from close-range wide of the target.
Suarez tried to get in on the goalscoring act on 63 minutes with a brilliant free-kick as, with everyone waiting for a cross into his box, he arrowed his shot towards the top corner and his effort was kept out by Szczesny at full stretch.
The impressive Coutinho almost created a sixth goal for Liverpool on 67 minutes when he wriggled past a couple of Arsenal challenges and picked out Henderson's run with a sublime pass, only for the midfielder to chip his effort wide of the target.
Arsenal won a penalty on 68 minutes when Gerrard brought down Oxlade-Chamberlain inside the box and Arteta stepped up to covert with the ease.
Arteta went close to scoring a second for Arsenal five minutes later when he drilled in a fierce free-kick which Mignolet did well to push away, but this was Liverpool's day.