After the Heysel Stadium disaster in 1985 and Joe Fagan's subsequent resignation as manager, Dalglish became player-manager of Liverpool. In his first season in charge in 1985–86, he guided the club to its first "double". Liverpool achieved this by winning the League Championship by two points over Everton (Dalglish himself scored the winner in a 1–0 victory over Chelsea at Stamford Bridge to secure the title on the final day of the season[22]), and the FA Cup by beating Everton in the final.[29] The following season was trophyless for Liverpool. Before the 1987–88 season, Dalglish signed a number of new players: Peter Beardsley from Newcastle, John Aldridge from Oxford United (who replaced Ian Rush); winger John Barnes from Watford; and Oxford United midfielder Ray Houghton. The new-look Liverpool side shaped by Dalglish topped the league for almost the entire season, and had a run of 37 matches unbeaten in all competitions (including 29 in the league; 22 wins and 7 draws) from the beginning of the season to 21 February 1988, when they lost to Everton in the league. Liverpool were crowned champions with four games left to play, having suffered just two defeats from 40 games. However, Dalglish's side lost the 1988 FA Cup Final to underdogs Wimbledon.[30] Dalglish guided Liverpool to victory over Everton in the second all-Merseyside F.A. Cup final in 1989, but was deprived of a second double in the last minute of the final game of the season. In the 1989–90 season Liverpool won their third league title under Dalglish. At the end of the season Dalglish also received his third Manager of the Year award. Dalglish resigned as manager of Liverpool (on health grounds[31]) on 22 February 1991, two days after a 4–4 draw with rivals Everton[32] in which Liverpool surrendered the lead four times. At the time of his resignation, the club were three points ahead in the league and still in contention for the FA Cup.[33]

Hillsborough disaster
Dalglish was the manager of Liverpool at the time of the Hillsborough disaster on 15 April 1989. The disaster claimed 94 lives on the day, with the final death toll reaching 96. Dalglish attended many funerals of the victims – including four in one day[34] – and was greatly praised for the dignity and compassion he showed in the aftermath of the tragedy.[35] Dalglish broke a twenty-year silence about the disaster in March 2009. He expressed regret that the police and the FA did not consider delaying the kick-off of the match, a move which might have averted the 96 deaths.[36] During the Hillsborough Memorial Service on 15 April 2011, Liverpool MP Steve Rotherham announced that he would submit an Early Day Motion to have Dalglish knighted, "not only for his outstanding playing and managerial career, but also the charity work he has done with his wife, Marina, for breast cancer support and what he did after Hillsborough. It is common knowledge it affected him deeply".[37]