Arsenal 2 Liverpool 1
The visitors, fresh from their win over Manchester United at the weekend, were undone by goals by Fran Merida and Nicklas Bendtner sandwiched in-between an Emiliano Insua wonder-goal.
The Gunners took the lead in the 19th minute when rookie Craig Eastmond regained possession to supply Merida just outside the right side of the area.
The Spanish midfielder, out of contract with the Gunners this summer, hit the ball first time and it rocketed into the net past Diego Cavalieri off the right upright.
The home fans were stunned seven minutes later though when Insua was picked out on the left side of the area by Ryan Babel and his shot swerved and dipped over a back-peddling Lukasz Fabianski to level the scores.
The Gunners youngsters turned on the style. Bendtner had two good effort saved by Cavalieri and Eastmond combined well on the right to burst into the area.
The youngster could and perhaps should have gone for goal himself, but instead pulled the ball back for Eduardo allowing Sotirios Kyrgiakos to make the interception.
The Gunners were back in the lead within five minutes of the re-start when Bendtner found the back of the net following an impressive passage of inter-play that reduced Liverpool to the role of spectator as the young guns flicked and tricked their way through the visitors midfield and defence.
Liverpool's next attack of note came on 65 minutes from a free-kick hit from 35 yards by Ryan Babel with enough pace to cause a few jitters as it fizzed its way to goal, but Fabianski claimed well.
The visitors stepped up the pressure and were lifted by the introduction of Yossi Benayoun and their £20million man, Alberto Aquilani.
Babel was just inches away from connecting with a Dirk Kuyt cross in the 80th minute.
The match had become stretched and Arsenal's slender lead looked fragile as Fabianski was forced to make a series of saves as Liverpool found their shooting boots.
However, Arsenals kids kept their heads cool and held on for the win to book a place in the fifth round draw on Saturday.