Chelsea finally broke the jinx that their Northern rival had held over them in the competition in recent years, despite Yossi Benayoun doing his best to ruin coach Avraham Grant's day.
The Israel captain set up forward star Fernando Torres with a virtuoso display in the second half to level the contest and send it into overtime, after the first leg at Anfield was also tied at 1-1.
But it is was third time lucky for Chelsea. After falling at the same stage twice in the last three years to the Reds, Frank Lampard and Didier Drogba scored in front of the Stamford Bridge faithful to pour misery on their bitter rivals.
Indeed, Chelsea was in the ascendency for most of the first half. Didier Drogba looked dangerous, dominating his opponents in the air and on the ground, while Michael Ballack controlled the match in midfield, playing well-timed balls over the top for the Ivorian and the sprightly Salamon Kalou.
Didier Drogba won a corner in the fifth minute and when the ball bobbled out from a scramble in the box, Michael Essein struck it first time from 25 meters, but high over the crossbar.
In the eighth minute, the red team created its best chance of the half when Benayoun hit Chelsea on the counter attack. After Joe Cole was dispossessed on the edge of the Reds' box, the Israeli midfielder played a clever one-two with Steven Gerrard before sliding Fernando Torres through on goal. But the Spaniard could only pummel the ball at keeper Peter Chec and out for a corner.
The african striker continued to threaten Liverpool's nervous defense. First he barged Martin Skrtel over, and Liverpool's January signing had to leave the field, to be substituted by the aging Sammi Hyppia.
Minutes later Drogba, with a point to prove after coming in for criticism by Liverpool coach Benitez in the last couple of days, powered past Jamie Carragher on the left, leaving only goalkeeper Pepe Reina to beat. But the Ivorian slid his left footed shot agonizingly wide of the post.
The breakthrough came in the 31st minute when Salomon Kalou was put clear through on goal and struck a fierce shot from the edge of the box which Pepe Reina did brilliantly to save. But Drogba picked up the rebound and struck an inch-perfect shot past the keepers grasping glove.
Michael Ballack paused over the ball, seemingly allowing the pressure to build on his uneasy opponent. But he could not reproduce the killer touch he showed against Manchester United in the Premier League on Saturday's last game. His free kick swerved inches wide of the post and clattered against the metal framework behind.
Talented Dirk Kuyt almost put Liverpool straight back into the tie three minutes into the second half when he latched onto a Gerrard header only three meters out, but Cech got down to block the ball.
As the weather worsened, Liverpool became ever more bogged down, struggling to create anything coherent outside its own half. We can say that Liverpool needed a moment of inspiration and Benayoun provided in the 63rd. He came in from the right, jinking past three home defenders before playing Torres through on goal. This time Liverpool's top scorer coolly slotted the ball home.
As both teams tired in the final minutes the match went into injury time. Essien scored a pile driver from twenty meters five minutes in, but it was ruled out. Nicolas Anelka was offside and was adjudged by the linesman to have impeded Reina's vision.
However, it was to be an academic sidenote. Hyppia needlessly fouled Ballack on the edge of the box in full view of the referee who did not hesitate to sentence a penalty shot.
The lonely star, Frank Lampard, made no mistake from the spot and celebrated emotionally less than a week after the death of his mother.
For every blue fan happiness, Drogba sealed the time at the end of the first 15 minutes after substitute Nicolas Anelka set him up.
Finally, Ryan Babel scored a stunning goal from over thirty yards with five minutes left on the clock, but Liverpool couldn't capitalize, and Chelsea goes through. Dream over for Benitez' side.