In the etymology age where every possible expression seems to have been run down to its true source, 'Liar, liar, Pants on fire' stands apart because I just googled it and nobody knows its origin fo' sure!
It is usually attributed (inconclusively and without much evidence, as far as I can make out) to an over-200-year-old poem apparently by William Blake, which is itself suspected of being a fake. Can some etymology wizard at ELU provide an authoritative answer backed by appropriate citation?
Peculiar usage: an old person in my hometown, who loved American colloquialisms, used to twist this around and say, "if it looks like pants and it seems to be on fire, then it's probably a liar!" [He later left India to join his son in the USA.]
Best Answer
Using the phrase "Liar! Liar!" seems to be older than the popular phrase associated with burning trousers. OED provides an early citation of the phrase used twice in a row:
I was able to locate the full verse in a later edition of the same book.
The phrase "licke dish," is interesting and personally I don't know how to explain that turn of phrase. However, it is remarkably similar to the phrase "lick spit" seen later in a context that seems relevant to pants on fire:
Meanwhile, use of "Liar! liar!" repeated for emphasis appears reasonably common in the 1800's. A few examples:
The article cited by Josh in the comments claims that the full line ("Liar, liar, pants on fire") was cited in print in 1933. The earliest reference I could find was from 1945, but clearly alludes at a historical context around the phrase:
Overall, this collection of references still seems to suggest that the phrase, in some form or another, was used in verse before any sources I've been able to locate.
While I have no direct evidence of a link, the rhyming line "nose as long as a telephone wire" suggests a possible allusion to the popular and widely translated children's novel The Adventures of Pinocchio (1881-1883) by Carlo Collodi, where, as most readers probably know, the marionette Pinocchio's nose grew each time he told lies.
Following this line of speculation, it seems worth noting that at three points in the novel, Pinocchio is threatened with burning as firewood.