The defending champions are going home.
The Reds found themselves up 2-0 at Anfield - and 2-1 on aggregate - but substitute Marcos Llorente scored twice in the first period of extra time to silence the home crowd. Alvaro Morata, who also came off the bench, added another tally late, giving the Spanish side a 3-2 win on the night and 4-2 victory on aggregate.
Diego Simeone largely has goalkeeper Jan Oblak to thank for Atletico's place in the last eight, as the Slovenian shot-stopper made 10 saves in an incredible performance. Liverpool dominated the contest, attempting 35 shots in total, but were continually stymied by Oblak.
At the other end, Jurgen Klopp was without his own acclaimed 'keeper; Alisson missed the match after suffering a muscular injury in training.
His absence loomed large.
A Georginio Wijnaldum goal sent the contest to extra time, and when Roberto Firmino made it 2-0 by tapping in his own rebound in the 94th minute, it looked as though the Premier League leaders were well on their way to overturning the first-leg deficit and continuing the defense of their title. But backup 'keeper Adrian's misplayed pass in the 97th minute opened the door for Atletico, and Llorente took full advantage by firing the ball into the bottom corner beyond the arm of his compatriot in the Liverpool net.
The Spanish midfielder found the net again just before the extra-time interval, and Morata ensured there would be no miraculous Liverpool comeback - a staple of their recent success - when he slid home a chance on the break with one of the final kicks of the match.
The shocking defeat signals the first time Liverpool have been eliminated in a two-legged European tie with Klopp on the bench.
"I am completely happy with the performance. It's so difficult to play a side like this," the German manager told BT Sport after the match.
"I don't understand with the quality (Atletico) have the football they play. They could play proper football but they stand deep and have counter-attacks," he added. "We accept it, of course, but it doesn't feel right tonight. I realize I am a really bad loser, especially when the boys put such an effort in against world-class players on the other side who defend with two rows of four."