Marseille 2 Liverpool 1 (agg 3-2)
Abdoulaye Meite's second half header and a Dider Drogba penalty following Igor Biscan's sending off for a professional were enough to give Marseille a memorable win after Emile Heskey had given Liverpool an early lead.
The result will be hard to take for Liverpool as they battled manfully with ten men for almost an hour, but the result is sure to increase pressure on Gerard Houllier as the defeat ends any hope of silverware at Anfield this season.
Marseille suffered a scare after just five minutes when Fabien Barthez went down injured when colliding with Habib Beye as Emile Heskey tried to get through to Steven Gerrard's pass.
The game was held up for over five minutes as Barthez received lengthy treatment but he was able to play on.
Liverpool broke the deadlock and netted the away goal they so much wanted on 17 minutes with Heskey grabbing his first goal since January,
Harry Kewell won the ball in midfield for Steven Gerrard who played Heskey in on goal with a fine pass and the big striker steadied himself before drilling his shot past Barthez.
Liverpool looked dangerous every time they went forward as the Marseille defence struggled with Owen and Heskey and Danny Murphy was inches away from doubling the lead on 24 minutes with a clever curling shot from the edge of the area which just cleared the crossbar.
The visitors threatened again two minutes later when Owen set off on a fine solo run down the left towards goal, but just as he got inside the box he knocked the ball too far in front of himself which allowed Barthez to rush off his line to clear up the danger.
Liverpool suffered a major blow on 38 minutes when Biscan was sent off for a professional foul on Marlet as the striker raced through on goal from a fine pass from Laurent Battles.
The Croatian defender appeared to tug Marlet's shorts as he tried to get clear on goal and although the offence appeared to take place outside the box referee Dauden Ibanez awarded a penalty before dismissing Biscan.
The penalty award infuriated the Liverpool players and coaching staff, but Drogba made no mistake with a clinical spot-kick to draw Marseille level.
The dismissal made Liverpool reshuffle at the back and Marseille laid siege to their goal in search of another goal.
Marseille thought they had taken the lead deep into stoppage time when Drogba headed home from a corner, but the referee disallowed the effort after seeing a push by the striker on Sami Hyypia
Liverpool came out in determined fashion for the second half and they almost restored their lead on 52 minutes when Hyppia saw his header from Gerrard's corner cleared off the line by Manuel Dos Santos and Barthez gathered the ball from under his own crossbar under pressure from Owen.
Marseille made their numerical advantage count five minutes later when Abdoulaye Meite arrived unmarked from a corner to power home a header from just six yards to send the Stade Velodrome into raptures.
Marseille were now content to sit back and defend and try to hit Liverpool on the counter attack as the visitors tried to get themselves back in the contest.
Liverpool's hopes suffered a blow when Owen went off injured on 62 minutes for Milan Baros after feeling his hamstring tighten up.
Drogba went close to grabbing a third for Marseille on 68 minutes with a header from Battles's cross, which fell just the wrong side of the post.
Liverpool threw everything into attack late on to try and draw level and substitute Bruno Cheyrou went close six minutes from time with a shot from the edge of the box just over the crossbar.
Despite their brave attempts Marseille held on to secure their place in the last eight and they will now face Internazionale in the next round.
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Marseille 2-1 Liverpool (agg 3-2)