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He played a crucial role in Liverpool's "double" winning side of that season, although his joy at winning a League championship medal was tempered slightly by his omission from the side for the FA Cup final which again was ironically against rivals and former club Everton, the first all Merseyside FA Cup final. However, he was more fortunate than the other players left out by Dalglish as McMahon was given the substitute's role and ended up with a winners' medal when Liverpool won 3–1, though he did not get on to the pitch.

The following year, McMahon this time started at Wembley when Liverpool contested the League Cup final against Arsenal. He set up the opening goal for Ian Rush but they ultimately lost the match 2–1. He had earlier scored four goals in Liverpool's record 10–0 victory over Fulham in the same competition. McMahon had also missed a penalty in the same game, which would have made him the only Liverpool player to score five goals in a competitive game that season but scored another hat-trick in the following round against Leicester. In total, he scored nine goals in the League Cup that season, as well as five in the league, totaling 14 in all competitions, although Liverpool endured their second trophyless season in more than a decade.

McMahon made his City debut two days later on Boxing Day in a 2–1 win over Norwich City at Maine Road. During his time for City, McMahon was initially seen as someone who would help raise their game due to his aggression and quality, but unfortunately the quality of team around him was not the same as at Anfield. Niall Quinn pointed out in his autobiography that McMahon reminded him of Roy Keane in his intensity and will to win: "Because he expected to win trophies, he could make the players at City feel bad about themselves, because we didn't have the same expectations... He was too intense for us... The lucky go happy atmosphere in our squad just didn't appeal to him".

As transfer deadline day approached, rumours were rife that leading goalscorer, Jan Åge Fjørtoft, would be leaving the club – most sources quoting a fee of between £3m and £4m. When the day finally came, Fjørtoft was sold for £1.3m – McMahon saying that no other offers were on the table. After Fjørtoft left, the goals dried up. The Town failed to score in six of the next eight matches, and were relegated to Division Two. McMahon was quoted as saying the relegation left him "feeling lower than a snake's belly".

The next two seasons followed similar patterns – a decent start, followed by a poor run-in. In 1996–97, Town held a mid-table position right up until the middle of March, but then scored just two goals in their last ten games – getting defeated 7–0 at Bolton Wanderers, 5–1 at Oldham Athletic and 4–0 at Ipswich Town in the process – ending up in 19th place.

In 2012–13, McMahon was featured in First XI, a reality television show that features amateur players and him being the head coach to guide them to professional footballing. They faced tough competitions and also went to Thailand and Spain to play friendly matches with BC Tero and Real Madrid Second Team. At the end of the season, they faced the All Stars team featuring former Singapore football players, Des Walker, as well as former Liverpool legends Robbie Fowler and Steve Harkness. They lost 0–1 in 2012 and lost again 0–3 in 2013.

McMahon joined Profitable Group on their board of Directors as Group Commercial Director in March 2008, leading the Group's Strategic Sports Investment Division. It was revealed in the News of the World that the group had tried to purchase his former club, Everton, but were knocked back. In late July 2009. McMahon has explained that Profitable Group had ended its interest in buying the club due to a lack of "communication and response" from Bill Kenwright.

In early February 2006 through 2007, McMahon signed an initial eighteen-month contract to work as a television pundit for Asia-based ESPN Star Sports, and has recently extended his contract by three years. There, he has worked alongside the likes of John Dykes as commentators, written his own blog, and is based in Singapore. He has also been responsible for recruiting other former English football stars such as Les Ferdinand and fellow ex-Liverpool players, Ian Rush and Steve McManaman.

He was signed in early 2005 as the manager of Perth Glory F.C. for the inaugural Australian A-League season. However his tenure at the club was short and he left the club in December 2005, part way through the season.

McMahon's brother, John, was an assistant manager of Shrewsbury Town, and was formerly on the coaching staff at Tranmere Rovers and now the current Reserves Manager for Liverpool, and his son, Steve McMahon, Jr. is a defender who played for Perth Glory F.C. and Blackpool and was loaned out to Kidderminster Harriers in 2004.

He left Blackpool following an argument over funds just before the final game of the 2003–04 season, having resigned midway through the season, only to burst in on 15 January press conference announcing his decision to withdraw the resignation following a talk with chairman Karl Oyston. At the time of his departure, McMahon was the fifth longest serving Blackpool manager in terms of Football League games in charge.

His next stop came at Blackpool, with whom he signed an 18-month contract on 7 January 2000. He stated that the job was a "great opportunity" and that his main task was to "keep us afloat this year and get us in a position where we can be safe". It was not to be, however: in May they were relegated to Division Three, but McMahon took them to promotion via the play-offs the following season and also won two Football League Trophies in three years. He signed a new contract with the club on 8 February 2001 that would see him remain in charge until at least the end of the 2002–03 season.

When the 1998–99 season kicked off, Town had no wins and just three goals (two of which were own goals) in the first five games, the calls for McMahon's head began to be heard. Chairman Rikki Hunt and McMahon seemed united – McMahon saying he wouldn't resign, Hunt saying he wouldn't sack him. Two consecutive derby wins, against Bristol City and Oxford United, only strengthened their position. This was followed by a 5–2 defeat at Portsmouth – and when Watford then won 4–1 at the County Ground, the fans held an on-pitch protest, sitting in the centre circle at the end of the match, demonstrating that both McMahon and Hunt should resign. McMahon left the club "by mutual consent".

The following season's demise was far more dramatic. A win at Portsmouth on 31 October 1997 took the Town to the top of the table, a position they held until the middle of November. They remained in a play-off position up until the middle of December, and then won just three of the remaining 24 matches, scoring just twelve goals. Again the Town slumped to heavy defeats – 6–0 at Manchester City, 6–0 at Middlesbrough and 5–0 at Norwich City.

In August 1996, following the departure of Alan Ball as Manchester City manager, McMahon was linked with a return to Maine Road as manager, but speculation that he would take the City job was swiftly ended when he signed a new five-year contract as Swindon manager.

When he arrived at Swindon Town in November 1994, they had recently been relegated from the Premier League and were battling against a second successive relegation. McMahon joined them as they were preparing for a League Cup match with Derby County. Caretaker manager Andy Rowland picked the team, and the Town progressed to the next round. McMahon took full control for the next game – a league match at Southend – and he picked himself in the starting line-up. The Town lost 2–0, and McMahon was sent off. His first victory came with a 2–1 scoreline against top-of-the-table Middlesbrough.

In 1993, McMahon was featured in Vinnie Jones's Soccer's Hard Men video, in which Jones talks about his adoration and respect for other "hard men" from the past and present including Souness, Bryan Robson, Mike Bailey, Norman Hunter, Jack Charlton, Peter Storey, Ron Harris and Nobby Stiles. Jones described McMahon as his "only real rival" in modern-day football for the accolade of "hardest man in football". He described how McMahon got his revenge on Vinnie Jones for Jones' early foul on McMahon in the 1988 FA Cup Final, by kicking Jones to the floor with his studs at Anfield, forcing him to have stitches on a major cut. McMahon played in 87 league matches for the Sky Blues before an offer to become player-manager of Swindon Town tempted him away from Manchester.

Graeme Souness had by now taken over as Liverpool Manager in 1991 and he immediately had some disagreements with some senior players including McMahon. In Souness's book, The Management Years he recounted that several players who were over 30 including McMahon were looking for bigger contracts at the end of their careers and were prepared to move elsewhere if their terms weren't met. There was also some resentment as new signings like Mark Wright were on bigger salaries, and the senior players wondered why players who had yet to win any trophies at Anfield could be earning more. Souness decided to sell McMahon, Houghton, Beardsley, and Steve Staunton, thus removing some of Liverpool's best players under Dalglish and breaking up the last great Liverpool team to win a title. After playing 15 games of the 1991/1992 McMahon left Liverpool to join Manchester City for £900,000 on Christmas Eve 1991 after playing 276 games, during which time he scored 50 goals. Souness later admitted that he had sold some key players too soon, when he should have kept them longer until suitable replacements were found. In the end, Souness brought Michael Thomas and Paul Stewart to compete in central midfield, neither of whom were to ever reach the same level as McMahon, as Thomas was beset by injuries and never able to fully replicate the important role vacated by McMahon. Stewart too was blighted with injuries, and only enjoyed anything like regular action in his first season at Anfield, making his final appearance some two years before finally departing in 1996.

McMahon again played frequently as Liverpool won back the title in 1990 but lost out on another "double" when they were beaten 4–3 by Crystal Palace in a thrilling FA Cup semi-final, in which McMahon scored. He was then selected by Robson for the England squad which would play in that summer's World Cup in Italy. Competition was fierce as he had to compete with Bryan Robson, Paul Gascoigne, David Platt and Neil Webb for a central midfield slot. McMahon came on as a substitute in the opening group game against the Republic of Ireland, but was responsible for gifting the Irish side their equaliser in the 1–1 draw – he miscontrolled a ball midway inside his own half of the pitch and Kevin Sheedy, a former Everton teammate of McMahon's, stole the ball and crashed a shot past Peter Shilton. McMahon started the later group game against Egypt which England won, and then started the second round match against Belgium. Fatigue and a tactical change saw him replaced by David Platt, who went on to score a spectacular winner and keep hold of his place right through until the semi-final defeat against West Germany, scoring twice more during the tournament. McMahon did not feature again until the 3rd place play off against Italy. He would play just once more for England after the World Cup, in a Euro 92 qualifier against Republic of Ireland in November 1990.

McMahon played on England's 1990 World Cup squad. In the second half of the group game against Ireland, with England leading 1–0, McMahon failed to control the ball on the edge of the English 18 yard box. Immediately, Republic of Ireland player Kevin Sheedy pounced and drove a left foot shot beyond Peter Shilton in the English goal. McMahon had just come on to the pitch as a substitute for Peter Beardsley. The game ended up as a 1–1 draw, but England still managed to win their group.

He made his 17th and final England appearance on 14 November 1990 in a 1-1 Euro 92 qualifying match draw against Ireland. He never scored for England at senior level.

In 1989 McMahon was again a regular fixture as Liverpool again chased a "double" of League and FA Cup. As one of the local lads in the team, he was deeply affected by the Hillsborough disaster during the FA Cup semi-final on 15 April. Brian Clough was publicly critical of McMahon afterwards. Liverpool won the Cup by 3 goals to 2 – McMahon set up the opening goal for Aldridge after just 4 minutes of the final – but they lost the League title in a decider at Anfield against Arsenal.

McMahon scored frequently for a man in his position as Liverpool won the 1988 League title. Memorable strikes included a 30-yard shot against Manchester United and the opener in a crucial Merseyside derby against Everton, although Liverpool only won the latter of those two games. When Liverpool reached the FA Cup final again, McMahon was one of the team's two Scousers (along with Aldridge) obliged to perform a localised rap on the official FA Cup final song Anfield Rap, written in a trend-encapsulating rap and house music style by teammate Craig Johnston. The song got to No. 3 in the UK charts, but Liverpool lost the final at Wembley to Wimbledon.

McMahon was afforded the ultimate respect by Vinnie Jones, who said that if he could stop McMahon, then Wimbledon could stop Liverpool. Jones and Mcmahon locked horns early on, and Jones fouled McMahon aggressively early on in the game with a two footed tackle. In Jones's autobiography he recounted that he wanted to "take out their top man" and McMahon actually managed to smash Jones in the eye with his elbow on the way down from the tackle, which led to a cut and scar on his face that remained on his face for a while. McMahon clashed with John Fashanu and Dennis Wise frequently throughout the match, although Liverpool lost on the day. McMahon was voted second place in the PFA Player Of the Year Awards, the winner being his colleague John Barnes. Later in 1988, McMahon won his first of 17 caps for England. There had been widespread clamouring in the press for manager Bobby Robson to select him, and indeed ITV commentator Brian Moore rapped a verse to that effect on the Cup final song ("Well Steve McMahon sure can rap, it's about time he had an England cap; so come on Bobby Robson, he's your man; 'cause if anyone can, Macca can!") with the last expression repeated in a scratch mix manner to emulate Melle Mel's rap which praised Chaka Khan on her 1984 hit, I Feel For You. Robson awarded him his debut on 17 February 1988 in a friendly international with Israel in Tel Aviv. McMahon played the full 90 minutes along with fellow Reds Barnes and skipper Beardsley but couldn't influence a victory having instead to make do with a goalless draw.

McMahon first represented England at senior level on 17 February 1988 in a goalless friendly draw against Israel. He was in England's squad for that summer's European Championships in West Germany, and played in the final group game, which England lost 3–1 to the Soviet Union, failing to progress to the semi-finals.

McMahon agreed to join Liverpool on 12 September 1985 for £350,000 thus becoming the first signing to be made by new manager Kenny Dalglish, and filling the void left by Graeme Souness over a year earlier. He made his debut 2 days later on the 14th in the 2–2 league draw with Oxford United at the Manor Ground. He didn't have to wait long for his first goal either, it came a week later on 21 September against his former club, Everton. McMahon's 42nd-minute strike turned out to be the winner as the Reds triumphed 3 to 2.

He joined Aston Villa on 20 May 1983 for £175,000, he made his league debut on 27 August 1983 in the 4–3 derby win over West Bromwich Albion at Villa Park. McMahon settled quickly and established himself in the heart of the Villains midfield. However Villa finished 10th in his first season, while his previous club, Everton, finished 3 places above them in 7th spot. The following season, 1984/85, ended up worse than the previous one as Villa finished in 10th spot again, only this time Everton won the title.

Halewood-born McMahon started his career at Everton, playing for them as a teenager after appearing at Goodison Park as a ball boy. He made his league debut on 16 August 1980 in the 3–1 defeat to Sunderland at Roker Park, he went on to be voted the supporters player of the year by the end of the 1980/81 season. His commanding presence in the Toffees midfield earned him the captaincy of the club. After 4 seasons which included 100 league appearances and 11 league goals McMahon moved to Aston Villa.

As a player, he was a midfielder from 1979 to 1998, most notably played for Liverpool in the late 1980s. McMahon was placed in 42nd position in the '100 Players Who Shook The Kop' poll, which asked Red supporters to name the best 100 Liverpool players of all time. He also played for Everton, Aston Villa and Manchester City. After his playing career ended, he began his coaching and managing career with Swindon Town, and later managed Blackpool, winning a promotion with both of these clubs. He later had a brief spell as manager of Perth Glory in Australia.

Stephen Joseph McMahon (born 20 August 1961) is an English former professional footballer, manager and current television pundit.