Holders Man City has been beaten on penalties by West Ham
The fourth-round tie had ended goalless after 90 minutes before Said Benrahma scored the decisive spot-kick. Phil Foden fired his penalty wide to give the Hammers the advantage in the shootout.
It is the first time since 2016 City, who have won the competition for the past four seasons, have been eliminated.
Pep Guardiola made nine changes to his side, but City finished the 90 minutes with substitutes Foden, Gabriel Jesus and Jack Grealish on the pitch as they searched for a winner in standard time.
Despite peppering West Ham's goal with 25 attempts, they could not find a breakthrough as the hosts claimed a famous win to advance to Saturday's quarter-final draw.
"It's been an incredible run," said Guardiola after his hopes of winning the competition for a fifth straight season ended.
"On penalties, they were better; congratulations to West Ham and we'll be back next year.
"Unfortunately, Phil missed it, but experienced, and when you get this kind of experience, next time, he will be better."
Nathan Ake should have headed City ahead in the first half before Ilkay Gundogan missed another chance from an angle.
Hammers keeper Alphonse Areola made a fine save to keep out John Stones' close-range header while West Ham's best chance fell to Tomas Soucek in average time.
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