Functional liquid fluoroelastomers are in high demand in new energy fields. And these materials have potential applications in high-performance sealing materials and as electrode materials. In this study, a novel high-performance hydroxyl-terminated liquid fluoroelastomer (t-HTLF) with a high fluorine content, temperature resistance, and curing efficiency was synthesised from a terpolymer of vinylidene fluoride (VDF), tetrafluoroethylene (TFE), and hexafluoropylene (HFP). A carboxyl-terminated liquid fluoroelastomer (t-CTLF) with controllable molar mass and end-group content was first prepared from a poly(VDF-ter-TFE-ter-HFP) terpolymer using a unique oxidative degradation method. Subsequently, an efficient “one-step” reduction of the carboxyl groups (COOH) in t-CTLF into hydroxyl groups (OH) was achieved via the functional-group conversion method using lithium aluminium hydride (LiAlH4) as the reductant. Thus, t-HTLF with a controllable molar mass and end-group content and highly active end groups was synthesised. Owing to the efficient curing reaction between OH and isocyanate groups (NCO), the cured t-HTLF exhibits good surface properties, thermal properties, and chemical stability. The thermal decomposition temperature (Td) of the cured t-HTLF reaches 334 °C, and it exhibits hydrophobicity. The oxidative degradation, reduction, and curing reaction mechanisms were also determined. The effects of solvent dosage, reaction temperature, reaction time, and ratio of the reductant to the COOH content on the carboxyl conversion were also systematically investigated. An efficient reduction system comprising LiAlH4can not only achieve an efficient conversion of the COOH groups in t-CTLF to OH groups but also the in situ hydrogenation and addition reactions of residual double bonds (C=C) groups in the chain, such that the thermal stability and terminal activity of the product are improved while maintaining a high fluorine content.