A frantic round-of-16 tie ended in heartbreak for the Gunners as Sporting Lisbon registered a 5-3 win in the penalty shootout at Emirates Stadium in Europa League.
The Premier League leaders who entered the 2nd leg with a 2-2 scoreline crashed out of the league after Gabriel Martinelli's kick from the spot was saved by Adan, Sporting's goalkeeper before Nuno Santos struck the winning penalty.
Earlier, Granit Xhaka had opened the scoring for Arsenal in the 19th minute which was later equalised by Goncalves in the 62nd minute, forcing the game into extra time.
Arsenal whose 6-match unbeaten streak in all competitions ended after the defeat have a 5-point lead in the Premier League table.
Meanwhile, In Seville, Marcus Rashford produced a clinical finish in the 56th minute, finding the bottom corner of the net with a low drive from outside the area to help United advance on a 5-1 aggregate score in the second-tier European competition.