Cedric Soares netted the winning penalty in the 4-3 shootout win for the travelling Saints after Richarlison and Theo Walcott both missed their efforts for the hosts.
Prior to the shoot-out, a first-half Danny Ings deflected effort had put the Saints in front but the Blues equalised in the final ten minutes through Walcott to extend the tie to spot kicks.
Ings opened the scoring just before half-time after some clever wing play from Nathan Redmond. Ings, who scored against Everton at Goodison Park earlier in the season, ghosted into the Blues box unmarked before arrowing a low effort across the mouth of Maarten Stekelenburg’s net.
A slight deflection off the foot of Morgan Schneiderlin saw the shot taken out of the reach of Stekelenburg and into the bottom right-hand corner of his goal.
The Blues gave themselves a late life-line through Walcott as the winger raced through on goal unmarked after half-time substitute Oumar Niasse had played him trough.
The winger swept his shot calmly under Angus Gunn to take the tie to penalties where Marco Silva’s side would ultimately falter.
Silva's changes backfire for Blues
After beating Fulham on Saturday in the Premier League, Silva stated that his side was unlikely to see wholesale changes but the Portuguese boss made seven.
Stekelenburg, the Blues’ cup ‘keeper, replaced Jordan Pickford whilst weekend goalscorer Cenk Tosun regained his place up front.
It was a night to forget for the Turkish forward as his early season struggles once again reared their head.
Flanking him from the off, summer signing Bernard and Ademola Lookman, had better games and provided early chances for the hosts.
The Brazilian and young English wingers linked up well - especially when Lookman bent an effort just wide of Gunn’s right-hand post and again as the Saints ‘keeper stopped Lookman’s chance half-volley.
Despite being in control of the first-half, it wasn’t smooth sailing for the Blues who could have seen themselves fall behind much earlier than they did.
Redmond pounced on a sloppy back pass from Schneiderlin but his effort from the edge of the 18-yard box could only find the bottom of the post and not the back of the net.
The Saints early woes in front of goal continued as the maligned Manolo Gabbiadini wasted an aerial chance after Mario Lemina had carved open the Blues backline with a lofted diagonal ball.
Blues still lacking depth
The changes to his team showed that Silva’s side is still lacking the depth that is needed to kick on and take the Blues’ progression to the next level.
There are still plenty of injured players who could make a difference to his side's campaign - notably Yerry Mina and Andre Gomes - but with what Silva has to work with in the meantime, will need more time to adapt to his style.
Silverware wait goes on
Unless there is better luck in the FA Cup, Everton’s wait for silverware will extend into another year. The Blues last picked up a trophy in 1995 and despite going close in the FA Cup, have not tested themselves in the League Cup.
Like many Blues bosses before him, Silva has missed a golden chance to move on in this years competition.
Ings the business for Saints
Many eyebrows may have been raised at the late loan deal to take Danny Ings to Southampton but the forward has already shown what he can offer, providing he stays fit.
It is now four goals in seven games for Ings - including two in two against Everton on Merseyside.
He will have to overcome his torrid injury misfortunes but the early signs are positive that the Saints have done the business getting him signed.