Two goals from Burnley midfielder Kevin McDonald sent Arsenal's young side crashing out of the Carling Cup.
McDonald opened the scoring after just six minutes, tapping home from close range after keeper Lukasz Fabianski had spilled the ball into his path.
The second came shortly into the second half with McDonald curling the ball past Fabianski from a tight angle.
Arsenal had several chances but found Burnley keeper Brian Jensen in fine form on a memorable night at Turf Moor.
Striker Nicklas Bendtner in particular endured a frustrating evening missing several decent chances for the Premier League outfit.
Arsenal manager Arsene Wenger kept true his promise to again field his youngsters who had been so impressive in their path to the quarter-finals of the competition.
Paul Rodgers, 19, was handed a debut while Arsenal also included 16-year-old Jack Wilshere and 17-year-old Aaron Ramsey.
Despite their lack of experience, Arsenal played with composure and elegance and at times were breathtaking in their play.
But as is so often the case with Arsenal, wastefulness in front of goal cost them dear as they came up against an organised and clinical Burnley side.
It was Arsenal who had the first chance of the game with Bendtner calling Jensen into an early save but the Danish striker fired straight at the legs of the Burnley keeper.
Just 80 seconds later, Burnley had the lead.
Chris Eagles created it, sending in a low cross from the right which keeper Fabianski spilled under pressure from Martin Paterson and McDonald was on hand to tap the ball home from six yards.
Arsenal had chances to equalise, several of them in fact, but Wenger's side, who had been clinical in front of goal in previous rounds, were in wasteful mood.
Bendtner missed the first opportunity to level, again firing straight at the body of Jensen following a decent flick-on from Carlos Vela.
Despite having the lead Burnley continued to press for the second goal with Paterson and Eagles in particular causing the Arsenal defence problems.
And Fabianski made sure the score stayed at 1-0 saving well with his feet from Paterson's low shot.
Shortly after, Bendtner's clever little flick found Mark Randall with just the keeper, but Jensen again came out on top with another fine save.
Again Bendtner turned provider this time playing in Vela with a header that split the Burnley defence but the Mexican striker failed to beat Jensen.
It was the final opportunity Arsenal had to level in what had been a highly entertaining and open first half.
Arsenal started the second period brightly with Fran Merida, who had a quiet first half, jinking his way past three Burnley defenders before curling the ball past the post.
But with Arsenal pressing for an equaliser they were caught with a sucker punch falling further behind after 56 minutes.
And it was McDonald who scored it claiming his second goal of the game with a fine finish.
The striker out-muscled Randall to Eagles' throw and curled the ball home with the outside of his right foot from 15-yards.
Soon after Paterson almost made it 3-0 but he headed straight at Fabianski from close range.
Jensen again prevented Bendtner from six yards out as Arsenal's frustration grew.
And late on Bendtner missed from close range with Jensen again using his legs to deny the Arsenal striker.
It was the last real chance Arsenal would have and summed up a frustrating night for the Premier League giants as Championship Burnley celebrated a famous victory and marched into the semi-finals.