The former Reds captain rolled back the years to provide a pin-point cross for Michael Owen to head in the opener, set up John Aldridge for a tap in, win a penalty for Robbie Fowler to convert and fire in a fourth goal himself.
It was a performance that had the sold-out Anfield crowd serenading their beloved No.8.
Prior to kick-off, the fans and the legends on show had paid a poignant tribute to Ronnie Moran, who sadly passed away this week, aged 83.
A minute's applause rung out for the revered former Reds player, captain, coach, physio, reserve-team coach, assistant manager and caretaker manager, who dedicated 49 years of his life to the club and was known aptly and simply as ‘Mr Liverpool’.
As the game begun it was clear that Gerrard was in the mood to show his class. His initial touches were cheered from the stands and he was roared to the rafters when he found Owen for the opening goal on 24 mins.
Picking up possession in midfield, Gerrard carried the ball deep into Madrid’s box before delivering a cross for Owen to head past Pedro Contreras. How many times have we seen that particular combination deliver goals down the years?
Owen returned the favour moments later as the pair dovetailed again. This time Gerrard’s volley into the turf was saved by Contreras.
Such was Gerrard’s influence that as the half drew to a close it took a near rugby tackle from Jose Emilio Amavisca to stop him. Gerrard saw the funny side, though, and embraced his assailant.
However, it was Liverpool's Jerzy Dudek who was the busier keeper in the first 45 minutes. The Pole made a series of sharp saves to deny Luis Figo, Clarence Seedorf, Michel Salgado and Amavisca as the visitors threatened.
Both sides made substitutions at the break, with Aldridge, Jason McAteer, Phil Babb and Sander Westerveld on for Liverpool and Dudek and Steve McManaman switching sides to play for Madrid.
Despite the changes, Gerrard’s influence remained constant. Just four minutes after the restart his low ball across the face of goal was tapped in at the far post by Aldridge in typical goal-poacher style.
Fowler then struck the crossbar after deftly taking down a Gerrard delivery before the man of the moment took control himself, racing into the box and winning a penalty from Dudek’s rash challenge. Fowler duly made it 3-0 from the spot.
Then, amid cries of 'shoot' from the stands, Gerrard struck the crossbar from 25 yards with a trademark effort. The only thing missing was a goal, but that arrived on 78 minutes as Gerrard controlled a lofted pass from Jason McAteer and then smashed home past Carlos Sanchez.
In the build up to the match, Liverpool player-manager Ian Rush had insisted his squad wanted revenge for the 4-2 defeat at the Santiago Bernabeu in the summer of 2015 and a convincing win certainly looked on here. But Real Madrid rallied.
Edwin Congo pulled one back for the visitors with a close-range finish in the 80th minute and former Liverpool man Fernando Morientes grabbed another a minute later.
Ruben de la Red then made it 4-3 in the 90th minute, but the Reds held on for deserved victory that Gerrard dedicated to the sadly departed Moran.