Steven Gerrard's 85th minute penalty and an injury time strike by Ryan Babel sent Liverpool into their third Champions League semi-final in four seasons after an exhilarating 4-2 win at Anfield.
Arsene Wenger's men were six minutes away from booking their place in the last four after Theo Walcott ran the entire length of the pitch to set up Emanuel Adebayor to level the scores at 2-2 on the night and 3-3 on aggregate.
That would have been enough to put London club through on the away goals rule.
But within a minute, Kolo Toure had clumsily challenged Liverpool substitute Babel in the box and Gerrard confidently converted the penalty to ensure another memorable night at Anfield.
On balance, Rafael Benitez's men just about deserved to advance having recovered from going a goal down to Abou Diaby's 13th-minute strike thanks to a first-half header from Sami Hyypia and a stunning strike from Fernando Torres with just over 20 minutes left.
Arsenal, who must now contemplate a third consecutive season without silverware, were left to rue what might have been after just about dominating their opponents for the first 30 minutes before finding a second wind that took them agonisingly close to going through.
Of the single changes made by each side from their first leg line-ups, Liverpool's was the more intriguing, Benitez unexpectedly opting to field two strikers in a ploy that involved promoting Crouch to a starting role alongside Torres and Gerrard deployed on the left of midfield.
Arsenal's adjustment was enforced. With Robin van Persie having failed to recover from a thigh muscle injury to start the match, Abou Diaby was drafted into the left of midfield and Alexander Hleb pushed forward as a foil for Adebayor.
In the build-up to the match, Benitez had been at pains to emphasise the advantage Anfield's unique atmostphere accords his side on nights such as these.
But it was his players rather than the visitors who, initially, appeared overawed by the occasion, and Arsenal might easily have taken an even earlier lead had Adebayor not carelessly strayed offside when Emmanuel Eboue, Hleb and then Fabregas had opportunites to play him in behind the Liverpool back four.
When the Togo striker did finally manage to get himself into a legitimate shooting position his effort was blocked by Reina at close range but Arsenal still went ahead.
Xabi Alonso was first to the loose ball but the Spaniard's under-cooked clearance flew only as far as Mathieu Flamini on the edge of the area.
The Frenchman spread the ball wide to Hleb, who exchanged passes with Fabregas before picking out Diaby's run into the box.
Having got away from Alonso, the midfielder unleashed a low shot that struck Reina's knee before finding the net at the near post.
Nearly half an hour had elapsed before Fabio Aurelia's deflected cross forced Manuel Almunia into his first save of the match, but from the resulting corner Liverpool were level.
Gerrard's delivery was curled towards the penalty spot and Hyypia, allowed a yard of space by Philippe Senderos, powered an unstoppable header in off the goalkeeper's left-hand post.
Suddenly it was Liverpool's pressing and passing that looked sharper and Arsenal were fortunate not to incur further damage in the immediate aftermath of the equaliser when Almunia flapped unconvincingly at Jamie Carragher's cross.
Arsenal's rhythm was further disrupted by the loss of Flamini's combative edge, the midfielder departing on a stretcher five minutes before half-time, and the hosts continued to dominate after the interval.
Crouch had a shot on the turn saved by Almunia within seconds of the restart and then deflected Fabio Aurelio's effort narrowly wide before providing the flick-on that presented Torres, a largely anonymous presence up until then, to strike in the 69th minute.
A sublime first touch enabled him to bring the ball under control while simultaneously spinning into a position from where he was able to fire an unstoppable shot across Almunia and into the top corner of the net.
Adebayor should have equalised three minutes later when, with only Reina to beat, he contrived to push his shot from 15 yards wide of the goalkeeper's left-hand post.
The Gunners finally did get their equaliser thanks to Walcott's exhilarating run. But their satisfaction was extremely short-lived and Babel's breakaway strike in injury time sealed Liverpool's win.
