The Portuguese winger struck in the 83rd minute to cancel out Robbie Keane's opener to ensure Atletico enjoyed a share of the spoils in the Spanish capital.
Liverpool dominated the opening forty-five minutes and took a 14th minute lead when Keane latched onto Steven Gerrard's through ball to dispatch a shot past Atletico goalkeeper Leo Franco.
Keane missed a glorious chance to double the visitors lead moments later and the home side began to threaten after the break.
Both sides had goals wrongly chalked off for offside by the officials but Simao capitalised on a rare mistake by Jamie Carragher with seven minutes remaining to drill a shot past Pepe Reina to send the Reds home with just a point.
The two teams continue to occupy first and second place in the group, with Los Rojiblancos topping the group by virtue of goals scored.
Liverpool will ensure a place in the last sixteen of the competition if they can beat Atletico in the reverse fixture at Anfield on November 4.
Rafael Benitez made two changes to the team that started against Wigan Athletic on Saturday.
Yossi Benayoun and Javier Mascherano returned to the midfield to join Xabi Alonso and Albert Riera with Gerrard supporting Keane in attack.
Carragher, Alvaro Arbeloa, Daniel Agger and Andrea Dossena made up the back four ahead of Reina in goal.
Atletico fielded former Liverpool players Luis Garcia and Florent Sinama-Pongolle.
The visitors settled quickly and took an early lead. Alonso dispossessed Pongolle in midfield and fed the ball to Gerrard, who released Keane with a precise through ball. The Irish international took a touch before netting with a neat finish past Franco.
Riera and Alonso both tested Franco soon after before Keane spurned a golden chance to make it 2-0 on 23 minutes.
The striker attempted to meet Gerrard's wicked cross with a spectacular flick but contrived to miss the ball completely, unmarked in front of goal, when a simpler finish would have surely sufficed.
On 38 minutes, Riera was booked by the referee for 'simulation' after he went down in the area under a challenge but TV replays later confirmed that contact had been made with the legs of the Reds' Spanish winger.
Atletico midfielder Maniche followed him into the book minutes later when he tried his luck at winning a spot-kick.
Former Manchester United striker Diego Forlan flashed a powerful drive across goal just before the break but Liverpool had been supremely comfortable.
Atletico were buoyed by the arrival of star striker Sergio Augero at the start of the second period but Liverpool had a goal incorrectly ruled out when Benayoun turned Gerrard's pass past Franco, only to see the flag of the referee's assistant raised.
The home side were victims of a bad decision at the other end when Forlan was flagged, although his effort was saved by Reina anyway.
Los Rojiblancos did have the ball in the back of the net on 57 minutes when Gioukas Seitaridis beat Reina with a curling effort but, again, the linesman wrongly ruled the strike out for offside.
A minute later, Reina produced a wonderful save to tip a low drive from Simao onto the base of the post as Atleti enjoyed their best spell of the game.
Benitez withdrew Gerrard on the hour mark, with Babel taking the Liverpool skipper's place, having earlier been forced to replace Keane with Dirk Kuyt after the Ireland forward picked up a knock.
Liverpool begun to assert themselves once more, having seemingly weathered Atleitco's storm and Alonso drilled a low shot just past the post before Kuyt slipped at a crucial moment having been played in on goal by Benayoun.
However, on 83 minutes, the home side drew level. A long ball forward was carried in the wind, causing Carragher to misjudge the flight of it. Forlan collected the ball and held off challenges from the Liverpool centre back and Arbeloa before squaring it across the box to Simao, who drove a low shot across Reina into the bottom corner.
Liverpool could have collected all three points at the death but substitute Ryan Babel headed Kuyt's centre the wrong side of the post from close range.
The result leaves Liverpool on course for the next round of the tournament and victory over Atleti at Anfield in a fortnight will see them through.
Final score: Atletico Madrid 1-1 Liverpool
Atletico Madrid: Franco, Seitaridis, Perea, Joshua, A Lopez, Camacho (R Garcia), Maniche, L Garcia (Aguero), Simao, Forlan, Pongolle (Miguel). Subs not used: Subs: Bernabe, Pernia, Heitinga, Paulo Assuncao.
Liverpool: Reina, Arbeloa, Carragher, Agger, Dossena, Mascherano, Alonso, Benayoun (Lucas), Gerrard (Babel 61), Riera, Keane (Kuyt). Subs not used: Darby, Aurelio, Cavalieri, Pennant.
Att: 44,500.