Manchester City thumped Championship Scunthorpe United 5-1 to take their place in the last eight and Chelsea saw off Bolton Wanderers 4-0 at Stamford Bridge.
That trio joined holders Manchester United, last year's runners-up Tottenham Hotspur, Blackburn Rovers, Portsmouth and Aston Villa in an all-Premier League draw for the quarter-finals which takes place on Saturday.
Manager Arsene Wenger, in charge of Arsenal for the 750th time and seeking his club's first silverware since 2005, put his faith in younger players as he usually does in this competition and they rose to the occasion with a well-deserved win.
Fran Merida, their 19-year-old Spanish midfielder, put them ahead with a superbly struck curling left-foot shot after 19 minutes, before Liverpool equalised with an equally stunning shot from Argentine Emiliano Insua, his first for Liverpool, six minutes later.
Liverpool, also fielding a team of promising youngsters and seeking their first win at Arsenal for nine years, played excellent football but were eliminated after Niklas Bendtner scored with a powerful left-foot drive after 50 minutes.
"There was very little difference between the teams," Arsenal manager Arsene Wenger told Sky Sports. "We looked dangerous and they looked dangerous, but I think there is enough quality here to win trophies again this season."
Liverpool boss Rafa Benitez, who made nine changes from the side that beat Manchester United on Sunday, said the defeat did not detract from the win over United.
"Of course we are disappointed to lose, but we do not lose the feel-good factor from beating United," he said. "It was a different team and a different competition."
One positive point for Benitez was the long-awaited debut of midfielder Alberto Aquilani after a protracted injury layoff.
The 20-million pound signing from AS Roma came on as a substitute in the second half and contributed a few telling passes.
Manchester City, who have not won a major honour since the 1976 League Cup, took the lead through Stephen Ireland after only three minutes against Scunthorpe, but the visitors shocked the ultra-rich Premier League side when Jonathan Forte equalised after 26 minutes.
City soon took control, however, with goals from Roque Santa Cruz, his first for City since his 17.5 million pounds move from Blackburn Rovers, with Joleon Lescott, Carlos Tevez and Michael Johnson adding the others.
Chelsea enjoyed a routine win over Bolton at Stamford Bridge with Salomon Kalou, Florent Malouda, Deco and Didier Drogba all scoring and taking the team's tally at the Bridge to 13 in three matches over the last seven days without conceding any.
The only blight for Chelsea was a head injury to goalkeeper Hilario, making a rare start, which forced him off in the first half. Manager Carlo Ancelotti said he had suffered concussion.
