The clash of the Under-18 squads of the two clubs battling for the Premier League title at senior level showcased plenty of future talent but City will be disappointed to have let their lead slip in the 86th minute.
City took the lead on the stroke of halftime when Spanish striker Nabil Touaizi smartly converted a low cross from compatriot Adrian Bernabe.
Yet four minutes from fulltime, Liverpool striker Bobby Duncan's long range effort flew through the hands of City keeper Louie Moulden to force extra time.
Both teams struggled physically in the additional half hour and Liverpool emerged triumphant in the shootout to secure their fourth FA Youth Cup and first since 2007.
(Reporting by Simon Evans; Editing by Toby Davis)
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