In 1891 John Houlding, the leaseholder of Anfield stadium, purchased the ground outright and proposed increasing the rent from £100 to £250 per year. Everton, who had played at Anfield for seven years, refused to meet his demands and moved to Goodison Park. Liverpool F.C. were founded by Houlding on 15 March 1892 to play at the vacated Anfield. The original name was to be Everton F.C. and Athletic Grounds, Ltd., or Everton Athletic for short, but was changed to Liverpool F.C. when The Football Association refused to recognise the team as Everton.
In December 1959, Bill Shankly was appointed manager, during his first year, he released 24 players and reshaped the squad. In 1961–1962, his third season as manager, Liverpool won the Second Division Championship by eight points and were promoted to the First Division, where they have remained ever since. In 1963–1964, Liverpool lifted the League Championship for the first time in 17 years. Liverpool were League Champions again in 1965–1966, having won their first FA Cup the previous season. Liverpool won their eighth league title and defeated Borussia Mönchengladbach to win their first European trophy, the UEFA Cup, in 1972–1973. However, a year later, following another FA Cup victory, Shankly retired, his assistant, Bob Paisley, became manager.
In 1975–1976, at the end of Paisley's second season in charge, Liverpool became champions, and won the UEFA Cup. The following year, Liverpool retained their League Championship, lost the FA Cup Final, but won their first European Cup, beating Borussia Mönchengladbach 3–1. Liverpool retained the trophy in 1978, beating Club Brugge 1–0, and in 1979 they broke another domestic record by winning the league title with 68 points, and only 16 goals conceded in 42 matches. In 1979–1980, Liverpool won the league title for the fourth time in five seasons, and Paisley's third European Cup victory came in 1980–1981. In the following two seasons, Liverpool won a League Championship and League Cup "Double". During the nine seasons Paisley managed the club, Liverpool won a total of 21 trophies, including three European Cups, a UEFA Cup, six league titles and three consecutive League Cups. The only domestic trophy to elude him was the FA Cup.
The succession of managers appointed from within the club's staff is worthy of note. These managers are often referred to as "the boot room boys" after a part of Anfield where the Liverpool staff discussed strategy and allegedly stored gin. Just as Shankly had been succeeded by Paisley, so too Paisley handed the reins to his assistant, veteran coach Joe Fagan. He was 63 when he became manager in 1983–1984. In his first season in charge, Liverpool become the first English club to win three major trophies in a single season; the League title, the League Cup and the European Cup. Liverpool reached the European Cup final again in 1985. The match was against Juventus at the Heysel Stadium but before kick-off, disaster struck. Liverpool fans breached a fence separating the two groups of supporters and charged the Juventus fans. The resulting weight of people caused a retaining wall to collapse, killing 39 fans, mostly Italians. The match was played regardless and Liverpool lost 1–0 to Juventus. English clubs were consequently banned from participating in European competition for five years, with Liverpool receiving a ban for ten years, which was later reduced to six. Fourteen of their fans received convictions for involuntary manslaughter.
Kenny Dalglish became Liverpool's first player-manager in 1985. His reign saw the club win another three League Championships and two FA Cups including a league and cup Double in 1985–86. However, Liverpool's successes were overshadowed by the Hillsborough Disaster. On 15 April 1989, when Liverpool were playing Nottingham Forest in an FA Cup semi-final, hundreds of Liverpool fans were crushed against perimeter fencing. 94 fans died that day; the 95th victim died in hospital from his injuries four days later and another nearly four years later having never regained consciousness, to make the total 96. After the Hillsborough tragedy there was a governmental review of stadium safety. Known as the Taylor Report, it paved the way for legislation requiring all-seater stadiums in the top-flight. The report ruled that the main reasons for the disaster were overcrowding due to a failure of police control.
Graeme Souness was installed as manager in 1991. However, apart from an FA Cup win in his first season, his reign was not successful. "Boot room" veteran Roy Evans took over in 1994. While his tenure saw some improvement in league form, in his five seasons the club never finished higher than third. Evans' only trophy was the 1995 League Cup. Gérard Houllier, the former French national coach, was drafted into the Liverpool management team for the 1998–99 season to work alongside Roy Evans, but the partnership did not work out and Evans resigned in November 1998.
Houllier's second full season in sole charge, 2000–01, was Liverpool's most successful season for many years as the team completed a combination of the FA Cup, League Cup, UEFA Cup, FA Charity Shield and UEFA Super Cup. They finished second in 2001–02, a season in which Houllier underwent major heart surgery. Houllier would only win one more trophy in his time in charge, against a background of growing disquiet amongst Liverpool supporters, Houllier and Liverpool parted by mutual consent at the end of the 2003–04 season.
Spaniard Rafael Benítez took over and in his first season Liverpool finished fifth in the Premier League. The season had a surprising ending, however, as Liverpool won their fifth European Cup in Istanbul. In 2005–06 Liverpool picked up 82 points in the Premiership, their highest points total in the top-flight since 1988, and ended the season by winning the FA Cup in yet another dramatic final, this time against West Ham. In 2006–07, the club's search for investment came to an end when American businessmen George Gillett and Tom Hicks became the owners of Liverpool F.C. in a deal valuing the club and its outstanding debts at £218.9 million. That season, Benítez guided the team to the UEFA Champions League final once again, where they lost 2–1 to A.C. Milan.