Yaya Toureâ€™s 52nd minute goal was the difference between the two sides as United had to deal with ten men for the final 15 minutes after Paul Scholes, ironically the only Mancunian on the pitch, was sent off for a reckless challenge on Pablo Zabaleta.
The win attracted the ire of Unitedâ€™s Rio Ferdinand who was involved in a fiery encounter with Mario Balotelli after the final whistle but the City players couldnâ€™t care less as they rejoiced and celebrated with the fans in blue.
City now have the chance to win their first trophy since 1976 when they meet either Bolton or Stoke City, who meet in the other semi-final tomorrow, in the final on May 14.
Venue: Wembley Stadium, London
Referee: Mike Dean
Yellow cards: MANC - Pablo Zabaleta 65â€™, Mario Balotelli 68â€™, Nigel de Jong 74â€™, Vincent Kompany 84â€™
MANU - nil
Red card: MANU - Paul Scholes 72â€™
It was a brilliant atmosphere at Wembley with both sets of fans in full voice for the Manchester derby and things really escalated around the 15th minute when United had two strong chances.
The first came when Park Ji-sung played a cheeky through-ball for lone striker Dimitar Berbatov who had freed himself in the area and looked like he would open the scoring only for Joe Hart to come out and make a massive save. United kept possession from the deflection and Nani crossed it back into the box where the Bulgarianâ€™s sliding attempt from close range somehow went over the crossbar.
After those pieces of action, the intensity of the match dropped slightly with plenty of play going through the centre of the pitch.
Nemanja Vidicâ€™s 25th minute headed attempt from a Nani corner wasnâ€™t far off the mark about seven minutes before Gareth Barry hit the side netting with his left-footed shot down the other end as the chances slowly started to come.
Edwin van der Sar was forced into a top save when Mario Balotelli struck from long range in the 34th minute moments before Joleon Lescott volleyed over the target from an Adam Johnson corner as City put pressure on the United defence.
Cityâ€™s Yaya Toure cut open the United defence only to see his attempt blocked by Vidic just before acting captain Vincent Kompanyâ€™s shot curled around the upright, leaving van der Sar stranded as Roberto Manciniâ€™s men continued to come at the Red Devils, and finishing the stronger of the two sides in the opening half.
City picked up where they left off early in the second half when Aleksandar Kolarov made a strong run down the left but his cross could not be turned in by Balotelli who was looming menacingly.
GOAL Then it was the moment that all the fans in blue came to see when Unitedâ€™s Michael Carrick made an error with Toure pouncing on his poor pass outside the area before he advanced past Vidic and slotted between the legs of van der Sar in the 52nd minute, sending the City fans into raptures.
The Blues had plenty of confidence after the goal and had a few opportunities to go two up just after the hour-mark when they had three corners in the space of two minutes but were unable to capitalise on their dominance which is always dangerous against United.
Then it was Unitedâ€™s turn to apply some pressure to their opponents and they came agonisingly close to a leveler in the 67th minute when Naniâ€™s free-kick took a little deflection off Balotelli forcing a diving Hart to glance the ball onto the crossbar in what was a huge let-off for City.
Things got decidedly harder for United when in the 75th minute, veteran midfielder Paul Scholes made a horrible challenge on Pablo Zabaleta in the centre of the pitch and received a red card from referee Mike Dean, reducing the trailing team to ten men.
United applied some pressure in the final stages but life was made difficult by the City defence, doubled with the fact that they were a man down, and they could not bridge the gap as the Eastlands clubs recorded a famous victory.
Joe Hart (gk) â€“ Pablo Zabaleta, Joleon Lescott, Vincent Kompany, Aleksandar Kolarov â€“ David Silva (Vieira 87â€™), Gareth Barry, Yaya Toure, Nigel de Jong, Adam Johnson (Wright-Phillips 79â€™) â€“ Mario Balotelli
Edwin van der Sar (gk) â€“ John Oâ€™Shea (Fabio 84â€™), Rio Ferdinand, Nemanja Vidic, Patrice Evra â€“ Antonio Valencia (Hernandez 66â€™), Michael Carrick, Paul Scholes, Park Ji-sung, Nani â€“ Dimitar Berbatov (Anderson 74â€™)