Diogo Jota scored twice to give Liverpool the chance of winning a ninth League Cup trophy when they go to Wembley to face Chelsea in next month's final.
Arsenal's misery was compounded when substitute Thomas Partey was sent off for two bookable offence during the 16 minutes he was on the pitch.
Jurgen Klopp's side once again prevented Mikel Arteta's men from scoring in a match that had initially lacked the incident most of the sellout crowd had hoped for from a such a big match night.
The best team over two legs won and Jota, who now has six goals in his last five matches against Arsenal, showed the Gunners' goal-shy strikers how to finish in style.
Mikel Arteta's patched up side, back in action after the postponement of Sunday's match at Tottenham when they were unable to field a team, dominated the opening stages but faded badly after Jota's 19th minute opener. The Portugal forward snuffed out any outside chance of a comeback with an even better goal 13 minutes from time.
Numerous flares and a couple of spectators made their way on to the pitch as the celebrations looked like crossing the line of acceptability, but the animosity between the clubs had been building up long before last night.
This was supposed to be the venue for the home leg only for Liverpool to get the match called off due to what turned out to be a flurry of false positive Covid tests. And this Liverpool side was too good for Arsenal, home and away.
Liverpool fans celebrated long and hard too as they contributed to a crackling atmosphere, with a good 6,000 of them packed in behind Caoimhin Kelleher's goal.
Their collective gasp, however, was loud enough to be audible among the Arsenal roars as Alex Lacazette clipped an early free-kick flush against the bar helped by a goal-saving Kelleher touch.
The young Cork keeper had been expected to start on the bench behind Alisson but he has not let Klopp down in cup appearances to date and again looked comfortable in the big-match atmosphere.
Liverpool weathered the storm to get the ball in the net but Joel Matip was clearly offside when he turned the ball in from close range. That was virtually their first form of any attack and although both managers looked manic in their respective technical areas Klopp looked the more concerned.
The game continued in a light cloud of red smoke, the result of a prematurely lit celebration flare from the visiting supporters — who had nothing left but their jubilant voices when Jota put them in front after 19 minutes.
The Portugal international turned inside the rusty Takehiro Tomiyasu, making a first start in three weeks, and scored with a scuffed right foot shot from the edge of the area which wrong-footed keeper Aaron Ramsdale and the Arsenal defenders trying to block him.
Arteta might have named a strong looking line-up after having Sunday's match at Tottenham postponed due to injuries, AFCON, and Covid but they quickly looked tired as Liverpool began to stretch them with their well-honed passing game.
The early zip and zest was missing from Arsenal's game now and the support sounded increasingly desperate against the backdrop of Liverpool's relentless celebrations.
Wearing their old school all yellow strip against Arsenal's traditional red and white the tie was evocative of many an epic clash between the clubs in the 70's and 80's— with Liverpool usually the winning side then too.
Klopp made a half time change with Ibrahima Konate replacing Matip at the back and he was quickly involved as Arsenal came out on the attack.
Just as in the first half they created an early chance for Lacazette, but this time the captain lifted a poor shot over the bar with only Kelleher to beat. It meant Arsenal had now gone some eight hours without scoring against Liverpool — and that was in a 3-1 defeat back in September 2020.
The French forward's miss was nothing compared to the howler from Liverpool youngster Kaide Gordon soon after. Jota destroyed Ben White down the left and laid on an open goal for Gordon from around the penalty spot. His anxious shot flew over the bar and Arsenal were just about still in the game.
Konate thundered a header against a post from a Trent Alexander-Arnold corner as the match entered its final half an hour with striker Takumi Minamino sent on to replace the 17-year-old Gordon.
The big substitution news came when Arteta sent on midfielder Partey with 16 minutes to go. The Ghanaian only landed in London at lunchtime having jetted back from his country's shock early exit from the Africa Cup of Nations.
It showed how desperate Arsenal were and what a willing player they have in the 28-year-old former Atletico Madrid man. Two mis-timed tackles later and he was gone.
He had been nowhere to be seen too when Jota sprung Arsenal's offside trap to score his and Liverpool's second with just over ten minutes to go. VAR worked for once and the joy was unconfined on and off the pitch.
Two flares made their way on to the pitch, along with a fan from either end of the pitch, as Klopp jumped for delight as he punched the air in victory.