League leaders Arsenal will face reigning World and European club champions AC Milan, while Liverpool, beaten finalists last season, must take on runaway Serie A leaders Inter Milan. Both English sides will be at home in the first leg.

Manchester United, champions of England, might have hoped for an easier assignment than French title holders Lyon, though they have the advantage of playing the second leg at Old Trafford.

Chelsea will also be on their travels as they begin the knockout stage in Athens against Olympiacos, champions of Greece for the past three years.

Scottish champions Celtic will hope to take advantage of their terrific home form and passionate support when Barcelona, the 2006 Champions League winners, arrive at Celtic Park for the first leg of their tie.

Liverpool will call on manager Rafa Benitez's tactical genius against Inter, who are unbeaten in Serie A this season and will start clear favourites.

In three previous seasons under Benitez, the Reds were underdogs when knocking out Juventus, Barcelona and, in two semi-finals, Chelsea.

Liverpool chief executive Rick Parry said: "Rafa is a great tactician and ties like this one are absolutely where he comes into his own. It's a mouth-watering prospect but it's what European football is all about."

It will be the first meeting between the sides since a European Cup semi-final in 1965 when Inter went through 4-3 on aggregate amid accusations that a referee was bribed by the Italian club.

Parry said: "With some of the fans that memory will add a certain piquancy to the matches."

Ernesto Paolillo, Inter's general manager, said: "This is history but sometimes it is not the same as the next match. We have a lot of respect for Liverpool and it is a very difficult match."

Arsenal will be more confident of pitting their vibrant young side against a vastly experienced Milan team that has not won at home in Serie A all season.

Keith Edelman, the Gunners' managing director, said: "We have got youth and speed and they probably have more experience. It will an interesting clash of styles and our fans are going to be very excited about it."

Umberto Gandini, Milan director, added: "Arsenal is probably the worst option we could get. It is an excellent team, very well coached and managed by Arsene Wenger.

"But they will play against the reigning champions with some of the best players in the world and it will be a fantastic spectacle."

Sir Alex Ferguson will be able to call upon his old friend Walter Smith's advice before Manchester United face Lyon at the Stade Gerland, where Smith masterminded a 3-0 win for his Rangers team in the group stage.

Lyon returned the favour with a 3-0 win at Ibrox to deny Smith - Ferguson's assistant coaching Scotland at the 1986 World Cup - and Rangers a place in the knockout draw.

United club secretary Ken Ramsden said: "I am sure without any doubt that they will talk but Sir Alex knows what Lyon are up to and they will be well watched between now and then.

"I think Lyon were one of the stronger options for us. They are a good team but we like playing good teams."

Marino Faccioli, Lyon sporting director, said: "We are happy to play a big team like United.

"We had a slow start to the season because many players were injured and new to the club. They needed some games to make things right and now we are better."

Celtic Park should have a good atmosphere when Barcelona visit a home team that has thrilled its supporters with late, late shows to win all three group stage matches, including a 2-1 defeat of AC Milan.

Peter Lawwell, Celtic chief executive, said: "It is a tough one. Celtic Park is where we have made our mark in the Champions' League so clearly the first leg will be key."

Txiki Begiristain, Barcelona sporting director, said: "We are happy to play the second leg at home but it will be very hard in the first leg - that is the most important one.

"We have experience of the stadium, the atmosphere, their style of play. But the style of Scottish football is not easy for us."

In the other ties, German's Schalke 04 face Porto of Portugal, AS Roma host Real Madrid, and Fenerbahçe of Turkey are at home first against Sevilla of Spain.

The first leg matches will be played on February 19 or 20, with the return matches on March 4 or 5 - except for Inter Milan v Liverpool on March 11.