The Toffees arrived at Anfield looking to avenge the 3-1 thrashing they suffered at Goodison Park in the final game of 2005.
Both teams were in form coming into the game, with Liverpool still basking in the glory of the 7-0 hammering they gave Birmingham City in midweek.
Everton's man of the moment Mikel Arteta missed out through injury, so Republic of Ireland international Kevin Kilbane deputised.
For Liverpool, Mohamed Sissoko came in for Djimi Traore, with Djibril Cisse not even making the bench.
The game started at a typically frenetic pace and both sides flew into challenges, with Kilbane picking up a bloodied lip from one encounter with Steve Finnan.
Everton's Tim Cahill then made Sissoko aware of his presence and was fortunate to escape a yellow card.
The first goal should have come after seven minutes following a melee in Jose Reina's area, but Cahill scuffed his shot after a deft turn.
Two minutes later James Beattie bamboozled the Reds defence with a neat back-header which he ran onto himself to play Cahill in. The Aussie shot into the side netting though.
A minute later Leon Osman dispossessed Peter Crouch and fed Beattie. The burly striker fired the ball home, only to be ruled offside.
Cahill was finally booked for a nasty challenge on Steven Gerrard as the game showed no signs of slowing down.
Gerrard followed the Australian in to the book for kicking the ball away after a free-kick was awarded against him for bringing down Kilbane.
His ill-discipline proved costly within seconds, when the Liverpool captain's mis-timed lunge on Kilbane resulted in a second caution and a red card. He left to a standing ovation from The Kop, but really only had himself to blame.
Xabi Alonso got in on the act and was lucky to escape with a yellow moments later after a wild lunge on Phil Neville.
Kilbane headed on to the roof of Reina's net from a Neville throw, as Everton looked to make the most of their numerical advantage.
However, it was Liverpool who broke the deadlock on the stroke of half-time when Neville headed past his own goalkeeper as he attempted to clear Alonso's dangerous corner.
The sight of an ex-Manchester United player scoring an own goal in an Everton shirt was, unsurprisingly, greeted with jubilation by the home supporters.
The celebrations continued two minutes after the break when Crouch flicked on Reina's long clearance for Luis Garcia to run on to and flick the ball over Richard Wright to make it 2-0.
Ten-man Liverpool kept piling on the pressure but Everton pulled a goal back just after the hour when Cahill's trademark header from an Osman corner found the net.
David Weir was the next player to go in to the book on 65minutes after tripping Sissoko on the edge of the area. Alonso's free-kick skimmed the crossbar, to the relief of the Evertonians.
James McFadden made way for talisman Duncan Ferguson and Andy van der Meyde replaced Kilbane on 67 minutes.
Seconds later, Stubbs prevented a certain goal with a last ditch block from a Garcia shot.
Van der Meyde lasted just six minutes before being harshly sent off for an elbow on Alonso.
That controversy was soon forgotten, as Kewell put the game beyond doubt on 84 minutes by beating Wright with a wonder goal from the edge of the area.
Wright spared Everton more embarrassment in the final stages with a fine stooping save from Garcia.
Liverpool, deservedly, will be able to claim the Merseyside bragging rights until next season at least.