In a tale of contrasting fortunes for the men between the posts, the Argentine, backup to Joe Hart, saved three spot-kicks while opposite number Simon Mignolet did not manage one save as City won the shoot-out 3-1 after the match had finished 1-1.
While all the focus had been on the attacking options both sides had at their disposal, the match ended up being decided by the goalkeepers.
Mignolet’s evening was something of a rollercoaster, as his error in allowing Fernandinho’s shot under his body handed City a lead that was only cancelled out by Philippe Coutinho’s 83rd-minute strike.
The Belgium international also made a number of excellent saves but, having handed the initiative to City, it was a long way back for Liverpool and their exertions began to tell in extra time.
It was only the fourth shootout the Anfield club had lost in 18 attempts.
Manuel Pellegrini lifted his third trophy in just under three years at City but he will hope it is not the last — they are still in the title race and the Champions League — before he is succeeded by Pep Guardiola in the summer.
For counterpart Jurgen Klopp, reaching his first final just 143 days after taking over at Anfield, it was more Wembley heartache after he lost the Champions League final there as Borussia Dortmund manager in 2013.
Both managers made big calls in their team selections: Klopp kept faith with midfielder Lucas Leiva, who missed the 2012 League Cup triumph with injury, at centre-back in an unchanged side while Pellegrini continued with his policy of playing Caballero in cup competitions.
Lucas justified Klopp’s faith with an assured display, winning a number of important headers, while Cabellero’s greatest test came from Alberto Moreno’s low cross-shot in the first minute.
The first real chance fell to Aguero, who has not scored in six major finals for club and country, midway through the first half when he cut inside Lucas and Mamadou Sakho, still struggling after a clash of headers with teammate Emre Can, only for Mignolet to tip his shot onto a post.
Sakho, replaced by Kolo Toure, had to be virtually ordered off the pitch by Klopp after being determined to continue against medical advice, and the France international’s frustration boiled over as he hurled a water bottle towards the bench.
The breakthrough came four minutes into the second half when Fernandinho’s angled shot from the right of the penalty area, hit low and hard, went under the body of the diving Mignolet.
That provoked a wry smile from Klopp, arms folded on the touchline, who only last month had rewarded the goalkeeper with a new five-year contract.
No player has made more defensive errors (five) in the Premier League this season, and this Wembley mistake felt like the most costly.
The game opened up as Milner shot wide, Raheem Sterling — who left Anfield acrimoniously in the summer in a £49 million deal — somehow missed from eight yards and City were furious with referee Michael Oliver after he decided Moreno did not bring Aguero down in the area.
With 20 minutes to go, Klopp gambled by taking off left back Moreno, with Milner asked to fill in, and bringing on Adam Lallana for his first appearance in three weeks.
And it paid off as the England midfielder hit the post from Sturridge’s cross and Coutinho drilled the rebound home in the 83rd minute.
In extra time, Mignolet went some way to redeeming himself by brilliantly denying Aguero in a one-on-one, Caballero repelled substitute Divock Origi’s close-range header and Aguero volleyed over from Milner’s attempted nod back to his goalkeeper.
Penalties followed, with Caballero coming out on top — his save from Lucas the best of his three — with Lallana and Coutinho also denied before wild scenes of City celebration.