(CNN) -- Lyon snatched a dramatic last-gasp 2-1 victory at Anfield as Liverpool lost four games in succession for the first time since 1987 to leave the English giants' Champions League qualification hopes hanging by a thread.
Maxime Gonalons (left) celebrates his equalizing goal as Lyon went on to stun Liverpool 2-1 at Anfield.
Liverpool came into the match struggling in the English Premier League, having already lost four of their nine matches this season.
And their form in Europe has been no better, with Rafael Benitez's side slumping to a 2-0 defeat at Fiorentina in their last match.
The omens did not look good when captain Steven Gerrard, who missed Saturday's 1-0 defeat at Sunderland through injury, was forced off midway through the first half when a recurrence of his groin problem.
However, Liverpool showed plenty of spirit in the first 45 minutes and took the lead four minutes before the interval when Yossi Benayoun showed calmness to lift the ball over goalkeeper Hugo Lloris from eight yards from Fabio Aurelio's cross.
But Lyon turned things around after the break and levelled in the 72nd minute when Liverpool failed to clear a corner and substitute Maxime Gonalons eventually dived to head home from close range.
The French side piled forward looking for the winning goal and they got their rewards when another substitute, Cesar Delgado, arrived at the far post to side-foot past goalkeeper Pepe Reina from Sidney Govou's teasing cross.
The result means Lyon have now got one foot in the knock-out stages after making it three wins from three in Group E, while Liverpool are third with just three points.
Italian side Fiorentina are second in the group with six points from their three matches after getting the better of minnows Debrecen in a 4-3 thriller in Hungary.
Peter Czvitkovics opened the scoring in the second minute, but two goals from Adrian Mutu and an Alberto Gilardino strike turned the game on its head before 20 minutes had even been played.
Gergely Rudolf reduced the arrears once again in the 28th minute, but Mario Santana restored Fiorentina's two-goal cushion in the 37th minute before Adamo Coulibaly made it a nervous ending for the Italians with his side's third goal with two minutes remaining.
There was also disappointment for the other English club in action, as Arsenal were deprived of their third successive Champions League win by a stoppage-time equalizer from Dutch side AZ Alkmaar. Watch CNN's fan reporter for Arsenal react to the Champions League result ».
Captain Cesc Fabregas gave the visitors a first-half lead when a stray pass from Niklas Moisander was collected by Andrei Arshavin. The Russian fed Robin van Persie, who passed across the area for the Spanish midfielder to slot home.
But Arsenal failed to get out of second gear all evening and they were made to pay for their casual approach when the home side levelled in the final minute.
Hector Moreno's ball into the area was flicked on by substitute Graziano Pelle for Mendes Da Silva to blast home a volley from close range.
The result means Arsenal remain top of the group with seven points from their three games and still appear favorites to qualify for the knock-out stages.
Meanwhile, in the other Group H encounter, Greek champions Olympiacos consolidated second place with a last-gasp 2-1 home win over Standard Liege.
Igor De Camargo put the visitors ahead after 37 minutes, finished low at the near post after Eliaquim Mangala and Milan Jovanovic linked up well.
But the hosts levelled two minutes before the break when Kostas Mitroglou headed home a Luciano Galletti free-kick.
And, in the last attack of the match, Galletti's corner was flicked on by Raul Bravo and substitute Ieroklis Stoltidis was on hand to convert from close range.