The Reds hit back through new signing Darwin Nunez and were arguably the better team in the first half. But they suffered a hammer blow just before the interval when Bukayo Saka stretched to score at the far post after more good work from Martinelli.
After the break, Arsenal took control of the game but were denied for a second time when substitute Robert Firmino beat Aaron Ramsdale with a superb finish.
Arsenal continued to create chances and were eventually rewarded with a penalty when Gabriel Jesus went down in the box under pressure from Thiago Alcantara.
Liverpool were furious at the decision, with replays showing there was minimal contact, but Saka stepped up to score – securing a crucial 3-2 win for the Gunners, who sit a point above Manchester City at the top of the Premier League standings.
Liverpool, meanwhile, are now 10u having won just two of their opening eight league games and are now 14 points behind leaders Arsenal, although they have played a game less.
After the match, Klopp was asked by beIN Sport journalist Cary Brown: “You said before this meeting that the title race was over…”
Before Brown could finish her question, Klopp burst out laughing. Watch the video below.
He then added: “Do you really think that after this performance, it’s now a 14-point gap – a big gap, albeit with a game in hand – you’re really writing off the title this early in the season?”
To which Klopp replied: “Yes of course.
“It’s not interesting. If some miracle happens in the next few months all of a sudden because everyone else starts losing all their games and we start winning. That’s the first thing we have to do, then we’ll be in contention again.
“We can talk, but that’s not really our problem. We understand the situation, we have other problems. We have to find a way to win football games consistently and that hasn’t come out yet this season.”
Klopp later clarified his comments in his post-match press conference: “We’re not in the title race. It’s naive to sit here and think we’re almost there.”
Liverpool next face Rangers at Ibrox in the Champions League on Wednesday before returning to Premier League action against defending champions Manchester City at the Etihad on Sunday.
Arsenal, meanwhile, travel to face Norwegian side Bodo/Glimt in the Europa League on Thursday before taking on Leeds United at Elland Road on Sunday.