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.
9. Jetro Willems - 5
Looks short of match fitness. Reactions are slow at times - 5 Photo: Ian MacNicol
10. Matty Longstaff - 7
A very good debut for the 19-year-old. Excellent first half, maybe faded a little after that - 7 Photo: Ian MacNicol
11. Yoshinori Muto -
Was in the right place at the right time for the United goal. Will do his confidence the world of good. Still unconvincing as a central striker due to his lack of physical presence - 6 Photo: Ian MacNicol
12. Christian Atsu (Matt Ritchie 44) - 7
Another bright show off the bench. You'd never guess this is the equivalent of his pre-season - 7 Photo: Stu Forster