Diouf has red card overturned
The Senegal international was harshly sent off late on in Liverpool's 1-0 win at Chelsea on Wednesday.
Diouf was booked for a foul on John Terry before picking up his second yellow card after a tangle with Adrian Mutu.
Referee Steve Dunn dismissed Diouf for tripping up Mutu, although television replays showed that both players got their bootlaces caught up with each other.
The FA issued a statement on their website which read: "Following the Premier League game between Chelsea and Liverpool at Stamford Bridge on Wednesday night, the FA has received correspondence from the match referee, Steve Dunn.
"Liverpool's El-Hadji Diouf was dismissed from the field of play for receiving a second yellow card. However, having viewed the incident relating to the second caution on video, Mr Dunn has advised the FA that he was incorrect to send the player from the field of play.
"Therefore, the sending off has been reduced to a caution for the earlier offence of 'tripping', and the player will not have to serve any suspension."
The news is a boost for Diouf and Liverpool as he will not now have to serve a suspension.
Meanwhile, Reds boss Gerard Houllier has confirmed Michael Owen will start this weekend's game with Aston Villa.
Owen was on the bench for the win at Chelsea having recovered from injury and he is set to start in attack alongside Emile Heskey on Saturday.
"Michael is ready and he will start tomorrow," said Houllier. "He could have played a part at Chelsea but with the way the game was going I decided it would be better to leave it a few more days.
"It's great to have him back. He has looked very focused and enthusiastic in training and it's a big boost for everyone at the club that he is now fit again."
Vladimir Smicer misses out against Villa after turning an ankle in training.