Paolo Maldini gave Milan a first-minute lead and Hernan Crespo's double gave Milan a seemingly unassailable lead.

Steven Gerrard gave Liverpool hope and Vladimir Smicer and Xabi Alonso levelled in a seven-minute spell.

Jerzy Dudek then saved from Andrea Pirlo and Andriy Shevchenko in the shoot-out to clinch a stunning victory.

It capped an amazing turnaround, with Liverpool looking out of contention after they were completely outclassed in the first-half.

Liverpool's advance to the final was a major shock as they invaded the established order of Europe's footballing elite - over-turning the odds against Juventus and Chelsea to reach Istanbul.

And in a show of character that broke Italian hearts they claimed the trophy for the fifth time - a feat that ensures the trophy will now stay at Anfield permanently.

Milan captain Paolo Maldini tears off his losers' medal

Manager Rafael Benitez made a bold team selection when he excluded Dietmar Hamann and Igor Biscan - so successful in the European campaign - on the sidelines in favour of Harry Kewell.

It was a decision that back-fired in the worst possible fashion in a catastrophic first 45 minutes for Liverpool.

Milan were ahead inside the first minute, when Pirlo's free-kick was met by the unmarked Maldini, who swept a finish high past Dudek.

Liverpool's lack of a holding midfield player allowed Milan to cut a swathe past Gerrard and Alonso.

And Kewell's ill-fated selection looked even more of a failed gamble when he limped off with a groin injury after only 22 minutes, to be replaced by Smicer.

Milan ended the first half exerting almost embarrassing domination, with two strikes in the last six minutes of the opening period.

Shevchenko broke away down the right flank in a sweeping attack, and crossed for Crespo to turn home from close range.

Lifting the trophy has to be the best feeling ever

Steven Gerrard More Liverpool reaction

And four minutes later, Milan added a third when Brazilian Kaka, the most influential player in the first 45 minutes, unlocked Liverpool's defence with a brilliant pass that released Crespo for a clever chip over the onrushing Dudek.

Benitez made a change at half-time - introducing Hamman for Steve Finnan, who had a thigh injury.

Dudek produced a fine diving save from Shevchenko's free-kick to stop Liverpool going four down before Benitez's side launched an astonishing comeback.

Gerrard threw Liverpool a lifeline with a header from John Arne Riise's cross after 53 minutes, and when Dida fumbled in Smicer's tame 25-yard shot a minute later, they were alive again.

And Liverpool's recovery was complete on the hour when Gennaro Gattuso pulled down Gerrard in the area as he was poised to equalise.

Dida saved Alonso's spot-kick, but the Spanish midfield man followed up to score the rebound with Milan's defenders looking on in stunned disbelief.

The massed ranks of Liverpool supporters, who sat in desolation during the interval, were now in ecstasy and contemplating a victory that seemed impossible just 15 minutes earlier.

Dudek saves Shevchenko's penalty to clinch the cup for Liverpool

Milan dominated possession in extra-time, and they were denied by a miracle double save by Dudek from Shevchenko with three minutes remaining.

He blocked Shevchenko's header then somehow diverted his shot over the top from only a yard out.

Serginho and Pirlo missed Milan's first two penalties, while Hamann and Djibril Cisse were on target for Liverpool.

Substitute Jon Dahl Tomasson put Milan in contention before Riise missed for Liverpool.

Kaka scored for Milan, and after Smicer scored for Liverpool, Shevchenko's kick was saved by Dudek to spark wild scenes of celebration.

AC Milan: Dida, Cafu, Maldini, Stam, Nesta, Gattuso (Rui Costa 112), Seedorf (Serginho 86), Pirlo, Kaka, Shevchenko, Crespo (Tomasson 85).

Subs Not Used: Abbiati, Kaladze, Costacurta, Dhorasoo.

Goals: Maldini 1, Crespo 39, 44.

Liverpool: Dudek, Finnan (Hamann 46), Traore, Hyypia, Carragher, Riise, Gerrard, Luis Garcia, Alonso, Kewell (Smicer 23), Baros (Cisse 85).

Subs Not Used: Carson, Josemi, Nunez, Biscan.

Booked: Carragher, Baros.

Goals: Gerrard 54, Smicer 56, Alonso 59.

Att: 65,000.

Ref: Manuel Enrique Mejuto Gonzalez (Spain).