Manchester City's Chilean goalkeeper Claudio Bravo (C) celebrates after saving the final Leicester penalty to win the penalty shoot out after extra time during the English League Cup quarter-final football match between Leicester City and Manchester City at King Power Stadium in Leicester, central England on December 19, 2017. PHOTO: AFP
Pep Guardiola showcased the riches at his disposal by making nine changes as his runaway Premier League leaders held their nerve to edge through 4-3 on spot-kicks after the two sides were locked at 1-1 following extra time.
Arsenal beat West Ham 1-0 to keep alive the prospect of two mouthwatering semi-finals featuring four of English football's "Big Six".
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In an ironic twist at the King Power Stadium Jamie Vardy — who had earlier scored a penalty deep into time added on to keep the tie alive — missed his spot kick in the shootout and Riyad Mahrez had his effort saved by City keeper Claudio Bravo.
"The way we had to react was not easy, we were tired, we had a lot of young players, Danilo was playing at centre-back for the first time in his life," said Guardiola. "It's not easy because Jamie Vardy and Riyad Mahrez were there. What I liked the most is how we reacted and overcame that situation. It's a good indication for the future."
City and Leicester have won the League Cup seven times between them but Guardiola and Foxes boss Claude Puel showed their priorities lie elsewhere with almost all of the big names missing from the two starting line-ups.
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Despite the changes in personnel, City — featuring England teenage star Phil Foden — dominated the early stages of the contest, twice going close to scoring through Ilkay Gundogan.
Leicester — without the likes of Vardy and Mahrez, who were on the bench — began to stretch City's defence through the lively Kelechi Iheanacho, formerly of City, but just when they appeared to have a foothold in the game, the visitors struck.
Gundogan, one of only two players to keep their places following Saturday's 4-1 victory over Tottenham, surged forward from the centre of midfield and fed Bernardo Silva, who finished coolly through the legs of Ben Hamer in the 26th minute.
Leicester started the second half brightly while City struggled to regain their earlier fluency and Puel threw on Vardy and Mahrez after about 11 minutes to the delight of the home crowd.
As they continued to press, the manager also introduced Demarai Gray and Leicester were given fresh reason to hope when a match official held up a board announcing there would be eight minutes of added time.
With the seconds ticking down, Gray burst into the box and went down under a challenge from City substitute Kyle Walker and the referee pointed to the spot.
Vardy slotted home under intense pressure to take the tie into extra time, in which neither side could break the deadlock.
The match went to penalties and it was Leicester's star pair who blinked first.
"We were unlucky," said Puel. "We have had most chances. It was a fantastic game between two good teams."
City, already being hailed as one of the finest sides of the modern era, are on a record-breaking run of 16 straight Premier League victories and are through to the Champions League knockout stages.
Arsenal booked their place in the semi-finals courtesy of a Danny Welbeck strike shortly before half time.
Manager Arsene Wenger fielded an entirely changed starting eleven from the side that beat Newcastle at the weekend against David Moyes's West Ham, who have been on a good recent run.
On Wednesday, Jose Mourinho's Manchester United travel to Championship high-flyers Bristol City while Chelsea host Bournemouth.
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