The Reds avoided a tricky trip to far reaches of Europe, and will instead face a 30-mile trip to their north-west rivals.
The two sides have already faced each other twice in the league this season, with United winning 3-1 at Old Trafford and 1-0 at Anfield.
Jurgen Klopp‘s side will be out for revenge as they bid to reach the quarter finals.
Klopp’s former side Borussia Dortmund were drawn to face Tottenham.
The ties will take place on March 10th and 17th, with the first leg at Anfield.
Shakhtar Donetsk vs. Anderlecht
FC Basel vs. Sevilla
Villareal vs. Bayer Leverkusen
Athletic Bilbao vs. Valencia
LIVERPOOL vs. MANCHESTER UNITED
Sparta Prague vs. Lazio
Borussia Dortmund vs. Tottenham
Fenerbahce vs. Brag
WATCH: Klopp reacts to the draw: