Two goals from Steven Gerrard, plus strikes by Fernando Torres and a late Andrea Dossena goal dealt Real Madrid their biggest defeat in the Champions League and secured a 5-0 aggregate win that humbled the Primera Liga outfit.
The victory was especially gratifying for Benitez who played for Real and worked as a coach at the Bernabeu.
"I couldn't image that score," he told reporters. "When you play Real Madrid it will be difficult and tight. We played really well away, at times we were fantastic, and we did well in a different way tonight. That showed we are a good team.
"We knew maybe they were expecting we would play deep and try to play counter attacking football. But we tried to put them under pressure. We were on top of them to the end."
Captain Gerrard, playing his 100th Champions League match, said it was one of Liverpool's best performances this term.
"That was as good as we have played this season. In the first 30 minutes we were awesome," he told Sky Sports.
SURPRISING RESULT
Real Madrid coach Juande Ramos defended his club's inability to reach the quarter-finals for the fourth time in five years.
"All teams at this stage of the competition are equal. Games of this quality are decided by small details," he told reporters.
"All the teams are of very good quality and one small thing can be important. It (the result) is surprising though."
Ramos blamed two controversial decisions for the defeat with Real denied a free kick in the build up to Torres's opener and Liverpool lucky to win a penalty for their second goal after the ball struck Gabriel Henize's shoulder.
"We are very disappointed. Indeed we are sad because we are out of the competition," Ramos added.
"We conceded two early goals and both of them had their doubts. There might have been a foul in the first and the penalty was not clear."
"We tried to take the game to Liverpool but they were too good on the night. They deserved to go through."
"We will now carry on in the league and hopefully catch Barcelona."
