Phil Foden was the only man to miss from the spot as Mark Noble, Jarrod Bowen, Craig Dawson, Aaron Cresswell and Said Benrahma all found the net for David Moyes' men.
Calum Chambers put Arsenal in front with his first touch after replacing the injured Benjamin White, heading in a knockback from Nicolas Pepe in the 55th minute.
Marcus Rashford was last seen on a football field missing a penalty for England in the shootout loss to Italy at Wembley Stadium.
It was a completely changed United lineup from the side that won at West Ham in the Premier League on Sunday so Cristiano Ronaldo did not feature.
City moved 16 points clear at the top of the Premier League as fresh from claiming their first silverware of the Pep Guardiola era in the League Cup final on Sunday.
Arsenal's season is in danger of imploding after a chastening League Cup final demolition at the hands Premier League leaders Manchester City raised fresh questions about the future of manager Arsene
City picked up their first silverware of the Pep Guardiola era by sweeping aside Arsenal 3-0 at Wembley on Sunday.
Brazil international Jesus has not featured for the Premier League leaders since he suffered a knee ligament injury against Crystal Palace on December 31.
The second division side scored a stunner through Korey Smith just when the match looked like heading to extra time to celebrate a famous win.
City goalkeeper Bravo saved Mahrez and Vardy spot kicks for the decisive moment following a 1-1 draw after regulation and extra time.
Claude Puel says he has unfinished business in the League Cup ahead of Leicester's quarters clash with Manchester City.
English League Cup: Manchester City need 'everything' as United, Chelsea, Arsenal hunt consolidation
This week's League Cup quarter-final action offers Pep Guardiola's side the chance to remain on course for a domestic treble.
Falcao, who had come off the bench, took a touch just inside the Caen half on the edge of the centre circle to find the middle of the net.
West Ham manager Slaven Bilic is under even more serious pressure after Ronald Koeman's sacking by Everton.
Manager Jurgen Klopp claims criticism of Liverpool's recent struggles is unjustified because their poor run is just a temporary blip.