Christian Benteke scored the solitary goal of the game to stop Leicester City’s fairytale run as the leaders lost 1-0 at Anfield, their first away defeat of the campaign.
Benteke spurned a gilt-edged chance to make the game safe in stoppage time when he was thwarted by Wes Morgan after Leicester goalkeeper Kasper Schmeichel had gone up for a throw-in, but his earlier strike was enough to give manager Jurgen Klopp a first win in four league games.
Leicester’s defeat, only their second of the season, means that Arsenal can go top if they win at Southampton later on Boxing Day.
Manchester City reignited their title challenge by bouncing back from Monday’s 2-1 defeat at Arsenal with a breezy 4-1 win over second-bottom Sunderland that left them three points off the summit.
Raheem Sterling, Yaya Toure and Wilfried Bony scored inside the first 22 minutes to put City in control, with Kevin De Bruyne adding a fourth before Fabio Borini replied for Sam Allardyce’s side.
But it was not all positive news for City manager Manuel Pellegrini, with Bony skying a late penalty and, more worryingly, skipper Vincent Kompany limping off just 10 minutes after coming on following eight games out with a calf injury.
Tottenham Hotspur tightened their grip on fourth place by overcoming Norwich City 3-0 at White Hart Lane, where Harry Kane scored twice -- the first a penalty -- to take his tally for the season to 13.
Diego Costa scored twice as Guus Hiddink began his second spell as Chelsea interim manager with a 2-2 draw at home to Watford, Oscar missing a late penalty that would have given the champions all three points.
Troy Deeney, with a penalty, and Odion Ighalo put Watford 2-1 ahead after Costa had given Chelsea a 32nd-minute lead, but the Spain striker equalised in the 65th minute from Willian’s pass.
Oscar had a chance to give Chelsea victory when substitute Eden Hazard was fouled by Valon Behrami, but the Brazilian slipped as he took his penalty and sent the ball looping into the crowd. Chelsea, who visit United on Monday, are two points above the relegation places in 15th place.
Elsewhere, Crystal Palace climbed one place to fifth after drawing 0-0 at Bournemouth.
Managerless Swansea City escaped the relegation zone as Ki Sung-Yueng’s ninth-minute tap-in saw off West Bromwich Albion, while bottom club Aston Villa drew 1-1 at home to West Ham United.
Swansea’s win saw Newcastle United drop into the bottom three, but Steve McClaren’s side can clamber out of the relegation zone if they avoid defeat at home to Everton later on Saturday.