A battling strike from Danny Murphy and a quality second from Nicolas Anelka gave Liverpool the edge in an enterprising Anfield showdown.
Damien Duff had managed a spectacular equaliser between Liverpool's strikes, all in front of the England manager.
Liverpool had to raise themselves for one last effort after months of consistency were ruined by the defeat at Spurs a fortnight ago that effectively ended their title dreams.
Second place was the aim of Gerard Houllier's side now in order to avoid the qualifying rounds of the Champions League, although even that was out of their hands.
Houllier opted to play all three of his strikers, Michael Owen, Anelka and Emile Heskey, with Heskey taking up the left flank role.
Steven Gerrard returned while Pegguy Arphexad was the substitute goalkeeper with Chris Kirkland injured. Also out with a calf problem was Jari Litmanen but Nick Barmby and Gary McAllister made the bench.
Blackburn, already assured of a place in the Premiership and the UEFA Cup next season, had John Curtis back in defence and veteran goalkeeper Alan Kelly in for Brad Friedel, who was already on World Cup duty with the USA.
England boss Sven-Goran Eriksson chose Anfield rather than Old Trafford, clearly to run the rule over Blackburn striker Matt Jansen, as well as Liverpool's hopefuls Murphy and Jamie Carragher before the announcement of the World Cup squad.
Murphy's first involvement was a kick in the face inside 30 seconds from Lucas Neill that needed several minutes of treatment - but it did not curtail Murphy's running, tackling and desire.
Carragher wanted to get in on the act and produced one fine cross which Anelka couldn't direct goalwards, and went on several more impressive runs down the right flank.
The England certainties - Owen, Heskey and Gerrard - were just as involved, working triangles of neat interplay.
Jansen, up against the formidable Sami Hyypia and Stephane Henchoz, did not stop moving in search of space, equally sharp and inventive.
Gerrard saw a 30-yard effort fizz wide of Kelly's right hand post, before Jansen took a 20th-minute pass from Andy Cole and managed to twist and wrong foot both of his markers to find the space to drive a shot just over the angle.
Two minutes later Murphy went one better with a goal which underlined his guts and determination.
John Arne Riise fired in a cross from the left and Murphy won possession but fell over in the process.
However, as he lay on the ground the midfielder had the foresight to hook the ball past a shocked Kelly.
It was a World Cup bound Irishman who struck next. Duff cut in at high speed from the left, played a double one-two with first Nils-Eric Johansson and then Tugay - leaving Heskey a bemused bystander - before drilling the ball past Jerzy Dudek's right hand for the equaliser.
Murphy continued to be at the heart of things. On 30 minutes, when Gerrard's dangerous cross was hurled into the box, Murphy flung himself bravely into the six yard box and sent the ball bouncing over the bar while colliding with Kelly and Craig Short.
The midfielder again needed plenty of treatment before being helped off behind the goal and more treatment followed before he was back into the fray.
Eriksson was also seeing Owen playing in the withdrawn role he has occupied of late for Liverpool, and one run and shot was inches wide with Kelly a spectator.
Gerrard then gifted the ball in midfield to Jansen, who surged forward before feeding Cole who attempted a clever flicked shot that Dudek held at full stretch.
Anelka then restored Liverpool's lead with a cracker. Riise charged down the left and squared the ball to the Frenchman who produced a burst of stunning pace to leave Short in his wake before calmly guiding the ball wide of Kelly.
HT: Liverpool 2 Blackburn 1
Liverpool were straight back at Rovers' throats after the re-start, and after a bout of head tennis in the visitors' box, the ball fell to Gerrard to send in a vicious hooked shot that was charged down.Blackburn surged to the other end and grabbed their second equaliser on 49 minutes, Neill's cross being met by a leaping Cole in the six-yard box. The power of his header surprised Dudek, who could only palm up the point blank effort, the ball dropping into the net.
But within three minutes Liverpool had regained the lead, after Murphy's jinking run down the left ended with him being brought down by Neill.
Murphy took the free-kick himself, curling a right footer into the box for Hyypia to power above everybody and glance a header wide of Kelly.
A minute later Murphy fed Anelka, 40 yards out, and the striker turned to surge forward before unleashing a searing drive which Kelly somehow pushed round a post.
News of Arsenal's goal at Old Trafford went round the crowd like wildfire, and Riise from 30 yards, plus Anelka with a close-range stab just wide, could have extended the lead.On the hour Keith Gillespie came on for Curtis, and Rovers hit back with a David Dunn run and shot that Dudek saved, diving to his left.
The game was as open as you could get, Murphy was running the show in midfield and Gerrard imposing himself with trademark running and passing.
Rovers, too, were giving everything. Dunn, sure to have impressed Eriksson, also rose to the challenge.
Gillespie and Jansen could both have scored in a impressive fight back, while Riise was put away by Anelka to beat two men and blaze a shot over the angle.
Rovers had Liverpool reeling by now, and Jansen arrived on the far post with 11 minutes left to drill home Gillespie's low cross for the equaliser.
With five minutes left, Carragher powered forward and fed Heskey, who charged along the face of the box before cutting in to drill a superb goal into the far corner.