The two teams traded blows in a superb 4-4 second-leg stalemate, but two late goals from Frank Lampard were enough for the Blues to kill off the tie and book a semi-final showdown with Barcelona.
Liverpool were trailing 3-1 from the first leg at Anfield last week and despite missing injured inspirational captain Steven Gerrard who was not even among the substitutes, they came within a whisker of causing a massive upset.
They led 2-0 at half-time and only a second-half fightback from Chelsea swung the tie back in their favour.
The Reds had started well and fired a warning shot in the 14th minute when Yossi Benayoun's clever flick played in Fernando Torres, but the in-form striker could only nudge a left-footed effort wide of the mark from 12 yards.
But with Chelsea stuck on the back foot, the first goal duly arrived after 19 minutes and it came courtesy of some intelligent play from full-back Fabio Aurelio.
The Brazilian was lining up a 25-yard free-kick when he spotted Petr Cech committed to one side of his goal.
Aurelio then impudently stroked the ball into the uncovered corner of the goal to leave Cech with egg on his face.
Spanish referee Luis Medina Cantalejo then took centre stage as he awarded Liverpool a penalty following a similar free-kick.
Replays clearly showed Branislav Ivanovic had his arms wrapped around Xabi Alonso and the Spain midfielder picked himself up before coolly slotting home the spot-kick.
That levelled the tie on aggregate - although Chelsea still has the advantage on away goals - but the home side just couldn't find their feet as the first half drew to a close.
But Chelsea finally responded in the early stages of the second period as Didier Drogba reduced the deficit when he got his foot to substitute Nicolas Anelka's hopeful cross and Pepe Reina could only turn the ball into his own net.
It was 2-2 on the night five minutes later when Alex stepped up and smashed a 22-yard free-kick over the wall and past a helpless Reina.
Chelsea maintained the initiative and Lampard's first goal on 76 minutes, when he slipped a close-range shot under the body of Reina after Drogba cut the ball back to the edge of the six-yard box, looked to have killed off Liverpool's challenge.
Indeed Rafael Benitez appeared to think it was game over as he took off Torres in an effort to preserve his star striker for the closing stages of the Premier League title run-in.
That move looked to have backfired when first Lucas with a deflected shot and then a bullet header from Kuyt put Liverpool back in front 4-3 on the night.
The Reds needed just one more goal to snatch the most unlikely of aggregate victories, but the impressive Lampard was to have the last word.
The England midfielder was the calmest man on the pitch as he dispatched a first-time shot from 16 yards in off the far post to level the tie at 4-4 on the night and secure a dramatic 7-5 aggregate victory.