The Reds went in ahead at the break, after Jadon Sancho clinically finished Bruno Fernandes's pass to reward Ralf Rangnick's side for our early pressure.
However, after the visitors controversially equalised in the second half, to force extra-time and penalties, Chris Wilder's side ultimately edged the penalty shoot-out to progress to the fifth round.
FIRST HALF- Returning Reds make the difference
United were almost ahead within just two minutes, when a defensive mix-up for the visitors led to a clipped effort from Sancho, which looped over Joe Lumley and struck the crossbar, before Fernandes fired over the rebound.