The Reds had looked on the verge of a heartbreaking exit after Emmanuel Adebayor had made it 2-2 with just six minutes left to cancel out Fernando Torres' 69th minute wonder strike.

But when substitute Babel was brought down for a penalty, Gerrard stepped up to coolly restore the home side's advantage before the Dutch forward raced through in injury-time to seal victory on the night and a 5-3 success on aggregate.

Ahead of the match Gunners striker Emmanuel Adebayor had suggested the Arsenal players knew all about the Anfield atmosphere - how wrong he was.

The wall of noise that greeted every one of the away side's touches in the early exchanges is not something you grow accustomed to during Carling Cup matches.

But while the likes of Juventus and Chelsea (twice) were unnerved by the Reds' famous 12th man, Arsenal were inspired by it and made the kind of fast start that has so often been Liverpool's forte.

Indeed, the away side were first to every loose ball, harrying the Reds midfield into mistakes and looking to release Emmanuel Adebayor at every opportunity.

And so it was somewhat surprising that Liverpool were the first to make a chance of any real note, when Steven Gerrard's marauding run to the byline on eight minutes almost saw a re-enactment of the goal he manufactured so brilliantly at the Emirates. But this time Dirk Kuyt could not apply the same sort of clinical finish and the ball sailed harmlessly wide.

It was a brief respite for Rafael Benitez's side who once again relinquished the impetus to Arsenal and on 13 minutes they paid the ultimate price.

A period of sustained pressure ended with Mathieu Flamini cutting the Reds defence to pieces with a clinical through ball for Abou Diaby, who beat Pepe Reina at his near post with a low drive.

The home side needed the famous atmosphere more than ever now, but as the half wore on it was Arsenal who continued to look more likely with two lightning breaks that first saw Emmanuel Eboue test Reina with a deflected volley, before the Spanish stopper had to be alert again, this time punching clear as Adebayor looked odds on to connect with Gael Clichy's searching cross.

Liverpool's chances were restricted to long range efforts with Fabio Aurelio's opportunist volley from 20-yards the best the hosts could muster in the opening 25 minutes of the match.

The Reds looked nervous and edgy and so the irony will not have been lost on Arsene Wenger, that on a night when the pre-match talk had centred around Liverpool's frailty at set-pieces, his own side were undone from a routine corner.

A neat interchange between Aurelio and Steven Gerrard opened up Arsenal down the left and when the full-back's cross forced Manuel Almunia to palm it out of play, the crowd responded with a roar of approval.

The message seemed to transmit onto the pitch as well as Gerrard's arcing set piece from the right was met by the imposing figure of Sami Hyypia, who celebrated the one-year extension to his contract penned earlier this week, with a bullet header that crashed in off the right-hand post.

Needless to say, Anfield erupted and the tide turned in Liverpool's favour.

If the first half an hour belonged to the Gunners, the final 15 minutes prior to the interval were the home side's as they looked to punish their opponents with the knockout blow of a second goal.

It didn't materialise though, despite a good opportunity when Jamie Carragher's cross from the byline almost fell for Peter Crouch before Kuyt's follow up was deflected to safety by a desperate Arsenal defender.

The Reds maintained the ascendancy into the second period and could have gone ahead within a minute of the restart when Peter Crouch latched onto a loose ball in the penalty area and hit a low strike that was well smothered by Almunia.

There was definitely more belief about Liverpool's play and as they attacked the Kop end, they continued to threaten as a lung bursting run and cross from Fernando Torres ended with Aurelio's miss-hit shot deflecting narrowly wide off the outstretched leg of Crouch.

The 12th man was playing its part too, as renditions of 'Oh Campione,' 'Fields of Anfield Road' and the new ditty paying homage to Fernando Torres echoed into the night sky, but despite forcing a chink in the Arsenal armour, it could not inspire a second Reds goal.

For all Liverpool's possession they still had to be wary of the Gunners' threat on the counter attack, a fact further underlined when Emmanuel Eboue escaped the attentions of the home side's defence to fire a warning shot into the side netting on 62 minutes.

The tie was balanced on a knife edge and it is on such occasions that players of breathtaking genius showcase the most precocious of talents.

Again the crowd looked towards El Nino and once again it was the boy from sunny Spain who delivered.

A long kick from Pepe Reina was flicked on by Crouch and when Torres took control in the penalty area, he turned his man brilliantly before curling a magnificent shot into the top right-hand corner.

It was goal 29 for the season and arguably his most important.

With time running out Arsenal threw caution to the wind, and Wenger brought on both Robin Van Persie and Theo Walcott.

It looked like Liverpool would hold on for the 2-1 victory but with six minutes remaining the young England international made the sort of impact his manager was looking for.

It was his surging run from the edge of his own area that carved Liverpool open down their left and when he crossed low into the area Adebayor was on hand to steer in the equaliser.

Anfield was stunned and the semi-finals beckoned for Arsenal.

But the Reds still had hope and little did we know that one of Benitez's substitutions would pay dividends in a similar manner, with Ryan Babel winning a penalty just two minutes later after being tumbled in the area by Kolo Toure.

Steven Gerrard held his nerve to send the Kop into raptures and become the first Liverpool player in history to net in four successive home European matches, before Babel capped another incredible night with an injury-time strike reminiscent of the one that saw David Fairclough immortalise his name in Anfield folklore way back in 1977.

Liverpoolfc.tv Man of the Match: Dirk Kuyt