The England striker hit goals either side of the interval to hand Glenn Roeder's men their second defeat against Merseyside opponents in the space of eight days and end our run of three Premiership victories on the spin away from Upton Park.
With Italian striker Paolo Di Canio sidelined through injury, Roeder was forced to bring Frenchman Edouard Cisse into midfield and push Sinclair up front alongside Jermain Defoe, while the league leaders also made one change from the team that were defeated by Valencia in the Champions' League on Wednesday, bringing Vladimir Smicer in for Steven Gerrard.
The Hammers made a fairly nervous start and Owen spurned an excellent opportunity to open the scoring in the ninth minute when he peeled away from Repka in the left channel but curled his shot just wide of the far post as he advanced into the area.
Eight minutes later, Owen wasted an even better chance, as he latched on to a slip from Repka in the area but saw his toe-poke kept out by the outstretched palm of James when it seemed easier to score.
However, you got the worrying feeling that his two misses were just the prelude to something more damaging for the Hammers and, sure enough, Owen made it third time lucky when, in the 28th minute, he collected possession on the edge of the area with his back to goal and was allowed to turn on the ball.
Pearce and Repka both dived in to no avail and the 22-year-old skipped past the challenges before clipping the ball over James and into the net from 10 yards out.
Hammers rallied slightly after going behind and registered their first effort on goal in the 30th minute, when Defoe did well on the right and clipped over a cross that Lomas headed just over.
Sadly, that was all the visitors had to offer in a totally one-sided first half and it was the Reds who should have doubled their lead on the stroke of half-time, when Carragher raced on to Murphy's inviting pass but dragged his shot wide from just inside the penalty area.
Thankfully, Hammers began the second half in more confident mood, perhaps sensing that their best form of defence maybe to attack. Indeed, just minutes after the interval, the teams should have been level. A right-wing cross from Cole caused confusion in the Reds' defence and, as Pearce flicked the ball into the six yard box, Lomas strode on to convert what looked like a simple equaliser.
Somehow, though, the Hammers' skipper only managed to direct his effort straight at the grounded Dudek, who gratefully held on to a ball he should have been picking out of the net.
As turning points go, it was sadly quite predictable, for just moments later, Owen struck again to double Liverpool's advantage - in bizarre fashion.
A slide-rule pass down the channel once again caught out the Hammers back-line and as James raced out, Owen skipped past his former Anfield team-mate before slipping over on the wet turf and scuffing a tame shot goalwards that didn't appear to pose any real danger. However, deceived by the mis-kick, Pearce failed to get a foot on the ball and Dailly couldn't get back in time to prevent it from rolling over the line.
That appeared to end the visitors' mini-revival and, although former Liverpool hero Titi Camara replaced Jermain Defoe to add some physical presence to the Hammers' attack, Liverpool by now had comfortable control of proceedings.
Owen, sniffing a hat-trick, tested James with a fizzing effort from the edge of the area, while Murphy and Hamann both went close with long-range efforts.
A fierce volley from Trevor Sinclair that flew well wide of the target in the final minute was Hammers' only other effort of any note and the hope is that the troops can now lift their performance for the visit of Oldham Athletic in our crucial Worthington Cup fourth round tie at Upton Park on Wednesday.