After the early substitute of Mohamed Salah, the momentum of the game seemed to swing in the favour of Zinedine Zidane's side.
With the help of two huge errors from Loris Karius, Los Blancos end a disappointing domestic season as the champions of Europe.
Karius horror show
Karim Benzema scored the opener to give Madrid the lead after 51 minutes.
After making a comfortable save, Karius's throw-out was intercepted by Benzema to turn the ball home.
It is one that the goalkeeper will not want to see ever again - one of the most bizarre goals you are likely to see in a final.
However, it was superb thinking from Benzema. Given the nod ahead of Bale the Frenchman repaid Zidane's decision.
Once again Karius made a huge error as Bale put his side two goals in front.
From distance, the Welshman struck but Karius could only turn what seemed a straightforward catch into his own net.
A matter of minutes after the first goal, Sadio Mané levelled the scoring.
From a corner, Dejan Lovren's header was directed goalbound but Mané turned it beyond Keylor Navas to equalise.
It was sharp thinking from the Senegalese international, showing great character to fight back minutes after going behind.
The Liverpool end rose in celebrations with the relief of cancelling out Karius's horrific error.
Liverpool were well and truly back in the game.
Bale showing Ronaldo how it's done
Unlucky not to start the game, Bale came on and within minutes produced a simply sublime overhead kick to put Madrid back in front.
Much like Cristiano Ronaldo's in the quarter-final, Bale acrobatically rose to cannon the ball home.
It is hard to find words to describe such a brilliant goal, especially on such a historic occasion.
The goal is one worthy of winning any game of football game and it proved the decisive factor.
Salah off through injury
Salah's Champions League final was cut short after being removed just 30 minutes into the game.
Salah stayed down after a coming together with Sergio Ramos but returned to his feet after a minute.
The Egyptian carried on after a clash with Ramos but only lasted a matter of minutes before requesting to be substituted.
The emotion was evident as tears streamed down Salah's face as Liverpool's talisman made the early walk down the tunnel.
It was the Reds who made the quicker start out of the two sides with their dazzling front-three proving too hot to handle for the Madrid defence.
Within the first 20 minutes, Los Blancos did not look like their usual selves. Sloppy and reckless on the ball, they were providing Liverpool hope.
Ronaldo provided Madrid with their first opportunity on goal after his shot flew well over Karius's bar.
The Portuguese talisman broke down the right side but chose to shoot rather than pass to Benzema who was in space inside the Liverpool box.
The only born-scouser in the team, Trent Alexander-Arnold came close to opening the score but Navas was able to get down and deny the youngster.
The Liverpool faithful will have had their heads in their hands just before the half an hour mark as Salah was taken off due to injury.
Moments later, history repeated itself as Dani Carvajal was forced off with an injury.
Benzema seemed to have given Madrid the lead just minutes before half-time. However, his goal was ruled out for offside.
The Frenchman latched onto the ball after a superb save from Karius from a Ronaldo header but Madrid were denied the lead.
Only two minutes into the second-half, Isco rattled the Liverpool crossbar.
A collection of errors led to the ball falling to the Spaniard but his mishit shot cannoned off the woodwork - a lucky escape for the Reds.
However, it seemed Liverpool's luck had been used up as Karius's blunder gave Madrid the lead.
The game suddenly soared into life as moments after the opener Sadio Mané revived the Liverpool side with an equalising goal.
With the game appearing to drop in tempo, Zidane replaced Isco with Bale and it quickly proved effective.
A stunning effort from Bale gave Los Blancos the lead on a night where someone in white needed to step up with Ronaldo uncharacteristically quiet.
Mane came close to equalising for the second time on the night after his long-range effort cannoned out off the post.