The foundations so successfully laid down by Bill Shankly were built upon with even more success by Bob Paisley. In 1976, Paisley's second season in charge as manager, Liverpool won another League and UEFA Cup double. The following season, 1976-77 the club not only retained the First Division League title but they also won the European Cup for the first time when they beat Borussia Monchengladbach. This was to be the first of five European Cup triumphs. Liverpool then went on to retain the European Cup in 1978 when they beat Bruges at Wembley with the winning goal coming from current manager, Kenny Dalglish. More success followed in 1979 when they regained the First Division title. A third European Cup triumph followed in 1981 when the mighty Real Madrid were defeated 1-0 in Paris with the winning goal coming from left-back Alan "Barney Rubble" Kennedy. Bob Paisley's reign as manager spanning nine seasons saw Liverpool win an incredible 21 trophies, including three European Cups, a UEFA Cup, six League titles and three consecutive League Cups. The only domestic trophy to elude Paisley was the FA Cup.

Paisley retired in 1983 and, in the now traditional style of promoting from within, he was replaced by his assistant, and another "Boot Room" disciple, Joe Fagan. If Liverpool fans thought that this change would signal the end, or the slowing down, of Liverpool's relentless pursuit of trophies, they would be proven to be terribly wrong as Liverpool won the League, League Cup and European Cup in Fagan's first season. In so doing they became the first English side to win three trophies in the one season. Liverpool again reached the European Cup final in 1985, against Juventus at the Heysel Stadium. Before kick-off, Liverpool fans stormed a fence inside the stadium which separated the two sets of supporters, and charged the Juventus fans. As a result the weight of people caused a retaining wall to collapse, killing 39 fans in the process, mostly Italians. The incident became widely known as the Heysel Stadium disaster. The match went ahead even though both managers did not want the game to be played. Liverpool lost the game 1–0. As a result of the tragedy, English clubs were banned from taking part in European competitions for five years. Liverpool's ban was extended to ten years, but this was later reduced to six years.

Joe Fagan resigned immediately after the disaster and Kenny Dalglish, "King Kenny" to the fans, was appointed as player-manager. During his time as manager, the club won another three First Division League Championships and two FA Cups, including a League and FA Cup "Double" in the 1985–86 season. To win both trophies Liverpool had to beat the efforts of near neighbours Everton. Liverpool clinched the title on the last day of the season when they won 1-0 at Chelsea with the winning goal coming from Kenny Dalglish himself and they also triumphed over their neighbours to win the FA Cup 3-1.

Liverpool's continuing success was overshadowed by the Hillsborough disaster in 1989. Thousands of Liverpool fans descended on Hillsborough, the home of Sheffield Wednesday, for the second consecutive season for an FA Cup semi final only for the day to turn into one of the worst tragedy's the world of football has ever witnessed. Nottingham Forest were the opponents again as they were in the season previously. The date of 15 April 1989 will be etched in Liverpool's history for ever as hundreds of Liverpool fans were crushed against perimeter fencing. Ninety-four fans died that very same day; the 95th victim died in hospital from his injuries four days later and the 96th died nearly four years later, without ever regaining consciousness. After the Hillsborough disaster there was a government review of stadium safety. The ensuing report, the Taylor Report named after the Lord Justice Taylor, paved the way for legislation that ordered all top division clubs to convert their stadiums to all-seater stadiums. The report concluded that the main reason for the disaster was overcrowding due to a failure of police control.

The club understandably took it's time to start playing football matches again after the tragedy but when they did they were involved in the closest finish to a league season ever. The 1988–89 season will be long remembered by many for the incredible last game of the season between the two title contenders, Liverpool and Arsenal. All Liverpool needed to do was to avoid losing by two goals or more. As we now all know, Liverpool finished equal on points with Arsenal and also on goal difference, but lost the title on total goals scored when Arsenal scored the final goal in the last minute of the season. Ironically the scorer of the second goal, Michael Thomas, later joined the Reds and was to go and score a stunning goal in the 1992 FA Cup Final.

After the Hillsborough disaster, Kenny Dalglish and the players and staff supported the grieving families in whatever way they could. Whether that would be by attending funerals or being available to talk to, it was imperative that the families were listened to and comforted in whatever way the club could offer support. In 1991 Kenny Dalglish suddenly rersigned as Liverpool manager immediately after the epic 4-4 draw with Everton in an FA Cup tie at Goodison. Dalglish cited the Hillsborough disaster and its repercussions as the reason for his resignation. Whatever the reasons, no-one could ever hold that decision against him.