Police officers surrounded streets in Walton after receiving reports of "erratic" behaviour.
Officers were called to Goodison Road at about 10.30am after calls from concerned neighbours.
The force said reports were made about a man "behaving erratically", reportedly with a stick.
A spokesman for the force said officers attended and spoke with the man inside an address, but were there for some time.
A police cordon was put in place on Goodison Road, but the spokesman confirmed neighbours did not have to leave their home.
It's understood the cordon was removed at about 2.45pm.
Officers later confirmed a man in his 50s was arrested following the incident.
Photos from the scene showed a heavy police presence, as officers surrounded the roads.
A spokesman for the force said: "We can confirm a man has been arrested on suspicion of affray after an incident in Everton this morning (Monday 1 June).
"Officers were called to the house on Goodison Road, just after 10.30am today (Monday 1 June) after reports of a man behaving erratically in the street holding a stick.
"The man then returned to the property and a containment was put in place around the house as a precaution whilst specialist negotiators engaged with the man.
"No-one else was in the property and a 53-year-old man from Everton has now been arrested on suspicion of affray."
