Liverpool's Champions' League dreams were dealt a savage blow when battling Leicester won at Anfield for the third successive season.

Martin O'Neill's stormtroopers hounded the life out of Gerard Houllier's side, who dropped out of the top three places for the first time since early March.

Liverpool have taken their eye off the ball at the worst possible moment and they finished a dispirited, confused side.

Leeds' home victory over Watford sees the Yorkshiremen now in that third Champions League spot and what Liverpool thought was a stroll back into the glamour of the European Cup is now going to be a nerve-shredding final few days of the season.

The fear at Anfield is that Liverpool's confidence has been shattered at just the wrong moment. Roughed up at Everton, outplayed at Chelsea and now outfought by Leicester.

A few weeks back they were gloating over a 13-match unbeaten run; now that confidence of a glowing future looks misplaced.

Worthington Cup winners Leicester, having already booked their ticket to ride in Europe, made life mighty tricky for a Liverpool outfit who have still not had their passport stamped for next season.

Liverpool are aiming for the Champions League, not the UEFA Cup that Leicester are already booked to play in, and they were given a fearful hounding.

Liverpool had skipper Jamie Redknapp in for his first game since November, with Robbie Fowler on the bench for the third game on the trot.

Leicester, severely weakened, had a back three that included Phil Gilchrist and Frank Sinclair behind a five-man midfield.

But any thought that O'Neill's side would be a pushover was dispelled inside two minutes. His battery of midfield scrappers were straight at Liverpool's throats and kept up the war of attrition throughout.

They caught the Anfield men cold with a first goal after one minute 58 seconds, with Neil Lennon's neat chip into the box catching out Stephane Henchoz and finding Tony Cottee.

Leicester's top scorer, who inflicted considerable damage on Liverpool in his Everton days, chested the ball down and scampered into the box to drill his shot wide of Sander Westerveld's left hand.

That stung Liverpool and a fourth-minute free-kick from Redknapp, from 20 yards arrowing into the top corner, was brilliantly saved by Pegguy Arphexad.

You would hardly have thought Leicester's season was effectively over. The likes of Robbie Savage, Neil Lennon and Muzzy Izzet fought for every inch, forcing an increasingly flustered Liverpool into errors and a string of complaints to referee Graham Poll.

Everton uncovered this worrying trait in Liverpool a few weeks back and the Anfield side clearly do not like a set-to. Couple that with the battering they received at Chelsea and all of a sudden the confidence has drained.

Emile Heskey, playing against his old club and more particularly the intimidating frame of Matt Elliott, struggled for time and space while Michael Owen did not appreciate the attentions of Sinclair.

Cottee got himself booked for charging down a Westerveld clearance and Patrik Berger was next in the book for his second bout of dissent, a trait that was running right through Liverpool's side.

To put a ring-rusty Redknapp into this was maybe a little cruel as the game whirled around him.

Liverpool needed to get back into the game quickly after the break but four minutes into the second half things got even worse for them.

Izzet's corner swung in from the left and Dominic Matteo got a touch in the box that wrong-footed Westerveld and fell for Gilchrist to nod in on the line.

Liverpool were really up against it now - invention and guile was crucial to counter Leicester's bravery and it slowly came into the home side's play.

Berger was first to force the issue as Arphexad stood motionless on his line when a 30-yarder from the Czech crashed against the bar and bounced down before the keeper could move a muscle to do anything about it.

Two minutes later the out-of-sorts Dietmar Hamann was replaced by Fowler, who with his first touch took a flick from Berger and forced Arphexad into a fine save to his right. Seconds later the French keeper was plunging again to hold a low drive from Berger.

Fowler put Owen clear after 61 minutes but a superb saving tackle by Gilchrist stopped the England star in the act of shooting.

The game was on a knife edge after Savage was booked for a foul on Redknapp, the Leicester man clearly infuriated when Liverpool did not return the ball to the visitors after Arphexad had kicked the ball out on Poll's advice so that Andy Impey could receive treatment.

Owen, who had laboured throughout, was finally taken off after 66 minutes to be replaced by Titi Camara as Liverpool battled to get back into the game.

Arphexad was again the hero as he threw himself at Fowler's feet on 70 minutes after Camara had put him in on the right of the box.

Henchoz, substitute Danny Murphy and then Camara were all booked inside five minutes as Liverpool's patience began to snap at their failure to break down the visitors.

Frankly Leicester deserved all they got. Their toil, running power and resilience had thwarted Liverpool at every turn and their disheartened fans were streaming away long before the bitter end.

Teams

Liverpool: Westerveld, Matteo, Hyypia, Henchoz, Carragher, Berger, Hamann (Fowler 52), Redknapp, Thompson (Murphy 74), Owen (Camara 66), Heskey.

Subs Not Used: Song, Friedel.

Booked: Berger, Henchoz, Murphy, Camara.

Leicester: Arphexad, Guppy, Sinclair, Elliott, Gilchrist, Impey, Izzet, Lennon, Savage, Eadie (Oakes 90), Cottee (Marshall 85).

Subs Not Used: Flowers, Walsh, Zagorakis.

Booked: Cottee, Savage.

Goals: Cottee 2, Gilchrist 48.

Att: 43,456

Ref: G Poll (Tring).