Liza Minnelli didn't like the joke Ellen DeGeneres cracked about her at the Oscars ... suggesting she was actually a drag queen.
Liza and a male companion hit up Craig's restaurant in West Hollywood Monday night ... and Liza made it clear -- Ellen's joke backfired big time.
Liza's note to Ellen: She should have stopped and acknowledged they were friends, but instead Ellen blew through to the next joke, so it sounded mean.
But Liza says she's sure Ellen was filled with the best of intentions.
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