James Maddison opened the scoring in the first half before Yoshinori Muto forced spot-kicks. Jonjo Shelvey and Isaac Hayden then missed decisive spot kicks in the shootout.
Which players shone and struggled in the cup exit? Scroll and click through the pages to see how Liam Kennedy rated every individual player.
5. Ciaran Clark - 6
Ciaran Clark - Never lets United down. Solid, dependable and it's easy to see why Steve Bruce kept him around - 6 | Getty Images Photo: Mark Runnacles
6. Matt Ritchie - 6
Moved further up the park to provide support to Muto. Worked hard up until he was clattered by Choudhury. Injury is a concern ahead of Watford - 6 | Getty Images Photo: Ian MacNicol
7. Isaac Hayden - 6
The midfielder is an absolute machine. Always full of running. Missed a vital pen in the shootout - 6 | Getty Images Photo: Marc Atkins
8. Jonjo Shelvey - 5
Skipper for the day but only really influenced in flashes. On excellent effort from 35 yards almost won it. Awful pen in the shootout - 5 | Getty Images Photo: Alex Livesey