It looked like Tony Gallacher had settled a scrappy affair in the young Reds’ favour when he found the top corner shortly after the hour mark.
But, despite goalkeeper Caoimhin Kelleher’s best efforts, Folarin Balogun forced in a leveller at the second attempt just before the full-time whistle.
The result leaves Neil Critchley’s team two points behind Leicester City and the Gunners at the summit of the table with two games still to play this season.
Liverpool were grateful for diligent defensive covering from Gallacher in the fourth minute.
A long diagonal into the Reds box was well controlled by Vlad Dragomir to open up a shooting opportunity but the strike was blocked by the left-back, who had sensed the danger and reacted quickly.
At times the game lacked the intensity you might expect from a top-of-the-table tussle, but Critchley’s side created the finest chance of the first half on 19 minutes.
Its genesis was in the impressive Neco Williams as his superb delivery from the right flank to the centre of the box found the unmarked Yan Dhanda – but the No.11 scooped his finish over the crossbar.
Tyreece John-Jules failed to make the most of time and space inside Liverpool territory and sent a soft header into Kelleher’s hands, while Joao Virginia calmly collected a firm Dhanda curler.
The Liverpool stopper then produced a remarkable save to keep the score goalless shortly before the interval.
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As the ball came down from a left-wing cross and bounced off a teammate, Xavier Amaechi thrashed it towards the roof of the net but saw Kelleher leap to tip the effort up and over the goalframe.
Dhanda might have done better with the first real opening of the second half, having broken in behind and shown his strength to shrug off Jordi Osei-Tutu, but he blasted off target.
The breakthrough came from a more unlikely source instead.
Intelligent hold-up play by Dhanda in a central position allowed Gallacher to attack space in the left channel and his first-time drive from a square pass soared across the goalkeeper and inside the right post.
Arsenal rallied and had a flurry of attacks, including a low punt from Josh Da Silva at the end of a counter-attack that Kelleher parried comfortably.
The Reds squandered an invitation to double their lead when the influential Herbie Kane picked out Dhanda inside the area with 79 minutes on the clock.
Virginia pushed out the forward’s touch and Toni Gomes’ dink towards the unguarded net was cleared away from the goalline by a recovering defender.
And the Gunners capitalised in the final seconds, with substitute Balogun hitting the net at the second attempt after the unlucky Kelleher had punched out Osei-Tutu’s angled strike.
Liverpool U23s: Kelleher, N. Williams, Gallacher, Phillips, Johnston, Dixon-Bonner, Millar, Kane, Gomes, Lewis, Dhanda.
Unused substitutes: Sharif, George, Whyte, McAuley, Hunter.