The Italian struck in the final 10 minutes to earn Brendan Rodgers' side all three points against the north Londoners, despite Spurs twice coming from behind at Anfield
Balotelli has endured a tough first season at Anfield, but picked an ideal moment to break his top-flight duck for the club with a well-taken late winner shortly after coming off the bench for Daniel Sturridge - who made his first Liverpool start since their 3-0 victory at Spurs in August.
|VIEW FROM ANFIELD
|By Peter Staunton
Step forward Mario Balotelli. He is the man who has given Liverpool a huge boost in their quest to find Champions League football again this season.
This fixture looked to be heading towards a draw and where once Brendan Rodgers would have summoned Rickie Lambert or Fabio Borini, he brought on Mario Balotelli.
The Italian did not have much to contribute but with a stab of his right boot he lifted the roof off of Anfield. It came at the end of a thrilling night on Merseyside that swayed this way and that.
Twice Liverpool led and twice Spurs pegged them back. Their own man of the moment, Harry Kane, was on hand with a goal and assist. But those around him failed to live up to their weekend showing against Arsenal and Spurs were downed.
One step forward, one step back in their own top four bid.
The England striker showcased strong hold up play to help set up Lazar Markovic for Liverpool's 15th-minute opener, which was quickly cancelled out by red-hot Spurs frontman Harry Kane.
Steven Gerrard restored Liverpool's advantage from the penalty spot eight minutes after half-time after Sturridge had gone down under an ill-advised challenge from Danny Rose.
Again Tottenham replied, though, as Moussa Dembele's close-range leveller just after the hour was allowed to stand despite Kane appearing to have strayed offside from Christian Eriksen's free-kick.
But there was one final twist in the tale as substitute Balotelli popped up seven minutes from time to smash home a low cross from fellow substitute Adam Lallana.
The win lifts Liverpool to within a point of Tottenham and just three points adrift of fourth-placed Arsenal.
Liverpool's early pressure paid off as Markovic made the most of good hold-up play from Sturridge to find the bottom-right corner with a scuffed strike from the edge of the area.
But for all Liverpool's early dominance they were pegged back 11 minutes later as Kane continued his fine run of form.
Erik Lamela's pass squeaked through the Liverpool defence and into the path of the striker, who restored parity with a low shot under the legs of Simon Mignolet.
Tottenham struggled to build on that equaliser, and only the woodwork kept them on level terms as Sturridge struck the post with a clever back-heeled effort following brilliant work down the right from Jordon Ibe.
Liverpool remained in the ascendancy after the break and were duly rewarded when Gerrard converted from the spot.
The Reds skipper beat Lloris to the keeper's left-hand side after Sturridge had cleverly jinked his way into the box and gone down under Rose's challenge.
Lamela drew an acrobatic save from Mignolet as Spurs sought a quick response, which came in the 61st minute as Dembele bundled the ball in from two yards.
The midfielder turned home a pull back from Kane - who appeared to be marginally offside in the build-up - after Eriksen's curling free-kick had been kept out by Mignolet.
Liverpool looked to be running out of ideas in their search for a winner, but the introduction of Lallana and Balotelli proved the turning point as the England playmaker raced to the byline to pull back for the Italian to break his duck and settle an enthralling encounter.