Liverpool began their defence of the European Cup with a 5–1 win over Dynamo Dresden at Anfield on 19 October 1977. Alan Hansen opened the scoring with his first goal for the club, Jimmy Case scored twice, and Phil Neal and Ray Kennedy completed a victory that gave Liverpool a four-goal advantage to take to East Germany.
A first-round bye had delayed the holders' entry until October. Bob Paisley's side now faced opponents they had eliminated on the way to winning the UEFA Cup in 1976.
John Toshack played a substantial part in the scoring. Hansen headed in after Toshack flicked on a corner, and the Welshman's delivery also supplied Case for the second. Liverpool's advantage increased before half-time when Neal converted a penalty. At the interval it was 3–0.
Case struck again after the break, with Kennedy supplying the assist. Kennedy then became the fourth Liverpool player to score, Toshack once more involved in the goal. Liverpool were five ahead before Reinhard Häfner answered for Dresden in the 76th minute.
For Hansen, recruited from Partick Thistle, the opening goal was an early contribution to Liverpool's European campaign. Toshack had helped create three goals without scoring himself, while Case's double carried on the work begun in the first half. The crowd of 39,835 had seen the holders establish a commanding position in their first tie.
Dresden won the return match 2–1 on 2 November, but the Anfield margin proved sufficient. Liverpool advanced to the quarter-finals 6–3 on aggregate, their defence of the trophy continuing despite defeat in the second leg.