Matt Smith gave the Latics a dream start when he headed the League One side ahead with less than two minutes on the clock.
Their lead lasted 15 minutes, as skipper-for-the-day Luis Suarez drew the Reds level when he fired into the back of the net from the edge of the area after a fine surge forward from deep.
However, with just seconds of the first half remaining, Smith tapped home on the line to ensure Oldham went into the break holding the lead before Reece Wabara made it 3-1 when he headed into the top corner moments after the re-start.
Liverpool dominated the latter stages as it looked for a route back into the contest, and though Joe Allen’s late volley gave them hope, they were unable to pierce the spirited Latics’ rearguard once again and exited the competition.
Brendan Rodgers opted to name a strong XI for the trip to Boundary Park, with Suarez, Daniel Sturridge, Fabio Borini, Martin Skrtel and Raheem Sterling all starting, while Steven Gerrard was on the bench.
It was a particularly poignant afternoon for Suarez, who was handed the captain’s armband for the first time in his Liverpool career.
Oldham began the contest at a frenetic pace, and its positive start was rewarded. Smith headed his team in front with less than 120 seconds played when the striker was able to bundle a header over the line from close range after the visitors failed to deal with Youssouf M’Changama’s cross.
The home crowd was fervent — and a clash between Brad Jones and Robbie Simpson served to raise the decibel levels a couple of notches further.
Liverpool had barely managed to muster an attack, but it drew level in the 17th minute with a touch of brilliance from Suarez. The No. 7 raced down the left wing before cutting inside. His attempted pass to Borini was cut out by a defender, but the ball broke back to Suarez who dispatched into the back of the net at the first time of asking.
The Uruguayan had the ball in the back of the net again soon after, glancing home Jordan Henderson’s free-kick, but the effort was ruled out for offside.
Liverpool were beginning to find their feet and Oldham had ex-Red Dean Bouzanis to thank for keeping the score at 1-1 when a flowing counter-attack resulted in Borini backheeling for Sterling to race into the area, though his low drive was thwarted by the home ‘keeper.
However, Oldham made sure the Reds were well aware they were still involved in a lively cup tie, as Jose Baxter, Robbie Simpson and Smith all threatened.
Then, in first-half stoppage, the Latics regained the lead when further poor defending from Liverpool resulted in Jones spilling Reece Wabara’s cross. The ball broke for Smith, who was left with the simple task of tapping over the line.
Within seconds of the re-start, Borini was guilty of spurning a gilt-edged chance to restore parity when he skewed over unmarked from Jack Robinson’s low center.
The Reds were left to curse that moment of profligacy when Oldham went 3-1 ahead seconds later. Carl Winchester’s deep cross to the back post from the left picked out Wabara, who looped a header over Jones and into the top corner.
It could have been even worse for Liverpool, but Baxter struck straight at Jones after a Sebastian Coates‘ mistake presented him with a good opportunity to net the Latics’ fourth.
Steven Gerrard and Stewart Downing were sent on in place of Andre Wisdom and Borini, as the visitors plotted a fightback.
It sparked a Liverpool onslaught on Bouzanis’s goal, with Gerrard, Sturridge and Suarez each taking turns to try their luck — though Paul Dickov’s side defended with dogged determination.
But there was little they could do, as Allen reduced the deficit with a deflected volley from the edge of the box in the 79th minute after the hosts had only half cleared a Liverpool corner.
Gerrard and Allen both went close as the ticked towards to full-time, with the captain smashing the crossbar from distance, but Oldham was able to hold on and secure a place in round five.
Liverpoolfc.com journalists’ man of the match: Steven Gerrard
Photo via LiverpoolFC.com