The club has its roots in the student team from the Catholic Capuchin school in Nuevo París, which began playing in 1908. The club took on the name Liverpool as there were many cultural links between the two areas; the majority of coal ships arriving in Montevideo came from the busy English port. A number of clubs took on Anglicised names, such as league rivals Montevideo Wanderers F.C.; in this case, the team paid homage to Liverpool F.C.
For the 2005–06 season, the away kit changed to a new all red one, thus looking exactly like the English Liverpool Football Club. Liverpool plays home matches in Estadio Belvedere (Belvedere Stadium), formerly owned by the Montevideo Wanderers.
Liverpool have failed to win any top flight domestic titles. They reached the final of the Torneo Apertura and Liguilla, both in 1995 only to be beaten by Club Atlético Peñarol and Defensor Sporting respectively. They are famously dubbed as the greatest team in the league never to win the title of champions.