Steven Gerrard drove home a controversial penalty four minutes into injury time to salvage a dramatic Champions League point for Liverpool.
Atletico will believe they were robbed of a place in the last 16 by referee Martin Hansson's hotly disputed penalty award for a debatable foul on Gerrard by Mariano Pernia.
They had led from the 37th minute following a cleverly constructed Maxi Rodriguez goal and frustrated Liverpool at every turn.
But Gerrard never gave up and his penalty eventually spared Liverpool's blushes and both sides should advance to the last 16.
Fernando Torres failed to even make the bench, missing his sixth match since picking up a hamstring injury while on international duty last month.
He cut a disconsolate figure in the directors' box having also missed the chance to play at his former club a fortnight ago.
From that match Liverpool left out Andrea Dossena and Yossi Benayoun, bringing in Fabio Aurelio and Dirk Kuyt, while Luis Garcia and Florent Sinama-Pongolle were also left on the bench by Atletico boss Javier Aguirre.
Liverpool started with pace and desire and could have scored in the first minute when Kuyt's close-range effort was grabbed by Leo Franco.
Another chance went begging when Xabi Alonso's stunning 40-yard pass found Robbie Keane arriving at pace on the edge of the box, but the Irishman's fierce drive thudded into the side netting.
Madrid were not slow to hit back and should have scored four minutes later. Pernia got to the byline and pulled back a cross but Simao hooked it over the bar from six yards.
Two more Liverpool chances then went begging, Riera's touch into the box almost set-up Gerrard as he surged into the area and Keane denied by Franco when he tried to round the Argentinian goalkeeper.
Atletico were also producing some quality football and scored an outstanding goal after 37 minutes.
Antonio Lopez broke down the right, taking a long pass with a superb first touch to confound Daniel Agger.
His pass into the box found Rodriguez moving into space away from Jamie Carragher before firing a shot across Jose Reina and inside the far post.
Atletico had looked calm and controlled in the first period, but came out for the second half having to defend in front of the Kop.
Liverpool were instantly at their throats. After just 60 seconds Luis Perea flicked the ball away from Keane with his right hand in the box, but Swedish referee Martin Hansson ignored the appeals.
Agger saw a header drop onto the roof of the net as Liverpool cranked up the pressure.
Ryan Babel was now on for Riera, Liverpool almost camped in Madrid's half with Atletico looking for the break to settle it. Surging runs from Simao and Diego Forlan emphasised the dangers.
Liverpool almost grabbed the equaliser after 70 minutes when Arbeloa and Keane combined to set up Gerrard, but the captain's shot just cleared the angle.
Maniche was booked for a foul on Arbeloa before Liverpool sent on David N'Gog for Keane. But at the same time Madrid sent on their brilliant Argentinian striker, Sergio Aguero in place of Forlan.
Lucas replaced Javier Mascherano but the danger of a devastating Madrid break was there every time Aguero got the ball.
N'Gog's control let him down a couple of times, but he forced Franco into a near-post save that produced a corner from which Agger saw another header go agonisingly wide.
Carragher got in on the act with a run and drive that Franco touched over, before a minute from time Luis Garcia came on, to a great reception, for Simao.
Still Liverpool looked unable to break through, until the fourth minute of injury time when Gerrard went down in the box under an aerial challenge from Pernia.
He made no contact with the ball but it was a debatable decision and Gerrard picked himself up to drive home the penalty and ruin Madrid's night.
Luis Perea, Aguero and John Heitinga Lopez were all booked in the uproar that followed but Liverpool had their fortunate draw.