It proved a case of men against boys as City's experienced side was far too strong for what was effectively Arsenal's reserve team.
Second-half goals from Carlos Tevez, Shaun Wright-Phillips and substitute Vladamir Weiss kept City on course for a Wembley appearance and their first piece of silverware since 1976, ironically in the same competition.
Tevez and Wright-Phillips each scored spectacular individual goals which were the fifth of the campaign for both players, while Slovakian Weiss opened his scoring account for the Eastlands club.
City's determination to go all the way was reflected by recalling Gareth Barry and Craig Bellamy for Robinho and Nigel de Jong, the two changes from Saturday's Premier League game against Hull.
Arsenal, meanwhile, fielded only Alexandre Song and Armand Traore from the team which lost Sunday's derby against Chelsea as they continue to use the competition to nurture young talent for the future.
Gunners old-boy Emmanuel Adebayor, Bellamy and Carlos Tevez had early chances for City, who also had a shout for a penalty rejected after Bellamy looked to be obstructed by Song.
Yet Arsenal might have snatched an unlikely lead and against the run of play when Carlos Vela burst through on goal only to shoot over when pressurised by Joleon Lescott.
City remained in control and made a 50th minute breakthrough after Tevez seized on a poor pass out of defence by Song, robbed Tomas Rosicky, cut in from the left and fired home an unstoppable shot which went in off the underside of the crossbar.
Any hope of an Arsenal fightback were extinguished with 21 minutes left when Wright-Phillips sealed victory with a stunning solo effort.
The winger broke from half way and from the right of the penalty area fired home an unstoppable shot into the top corner.
City added their third goal in the last minute when Bellamy broke away on the left and delivered a low cross to the far post which Weiss blazed home off the underside of the crossbar.
Arsenal came within inches of a consolation goal in stoppage time when Mexican Vela's long-range drive struck the crossbar, but it would have been a case of too little, too late.