In 1998, Houllier was invited to become joint team manager (together with
Roy Evans) of
Liverpool Unfortunately, the arrangement did not work well and Evans resigned a few months later, leaving Houllier in sole charge of the team.
Houllier began a five-year programme to rebuild the team, initially clearing out the
"Spice Boys" - a term coined by Liverpudlian journalists to describe
Paul Ince and his followers including
Robbie Fowler, David James, Steve McManaman and
Jamie Redknapp, as underachieving playboys in the game. To replace the players he did not see eye to eye with, and with the club short of money, Houllier engaged the services of a clutch of continental players from overseas, mainly from France.
He signed
Stephane Henchoz and
Sami Hyypiä prior to the start of the
1999-00 season and formed a promising partnership at the back. Houllier's aim was to finish second or third in the league, but after a last day defeat to
Bradford City, Liverpool were compensated with fourth place, ensuring them with a UEFA Cup place. Leeds United instead were gifted with the last
Champions League spot.
Restructuring a winning team took a couple of years but eventually resulted in the extremely successful
2000-01 season, when Liverpool won the Worthington Cup (
League Cup), the
FA Cup and the
UEFA Cup to complete a unique
Cup treble, as well as finishing third in the
English Premier League. This meant Liverpool were going to qualify for the UEFA Champions League for the first time, since its change in 1992.
Liverpool had made a promising start to the
2001-02 and attained the
European Super Cup as well as the
Charity Shield, which meant Liverpool became the first English team to win five cups in the same calendar year although only the FA Cup and UEFA Cup are considered significant pieces of silverware.
In October 2001, after falling ill at half-time of Liverpool's
Premier League match with
Leeds United, Houllier was rushed to hospital for an eleven-hour emergency operation when he suffered a dissected
aorta. He returned to active management of the club after five months, but many Liverpool fans felt that he was never quite as effective a manager afterwards. The beginning of the end was perceived by many to be his decision to substitute a fit
Dietmar Hamann, and bring on
Vladimir Smicer away to
Bayer Leverkusen in a UEFA Champions' League quarter-final. In a game balanced 1-1 with Bayer requiring 2 goals to win, Houllier took off the defensive midfielder and exposed the defence to endless attacks. Bayer were lifted by the German's exit as Smicer did little to help the defence.Also Houllier's poor summer signings of 2002 (El-Hadji Diouf (Lens 10 million), Salif Diao (Sedan 5 million) and Bruno Cheyrou (Lille 4 million)) failed to build on an impressive second place in 2002. Many pundits have commented that Houllier's failure to replace creative talents such as Gary McAllister and Jari Litmanen was a main factor in Liverpool's poor performance in the 2002-03 season.
A lack of success in later seasons, coupled with what were considered by some alleged "neutrals", negative one dimensional tactics and unattractive football, a poor youth policy, and a lack of support from fans, led to Houllier's departure from Liverpool F.C. on
24 May, 2004. He left by mutual consent with the club.
One year later, on
25 May, 2005, a Liverpool team containing many of Houllier's players won the UEFA Champions League under new manager
Rafael Benítez - Houllier joined the celebrations in the dressing room afterwards.
