Brazilian Fabio Gama squandered a first-half penalty and that proved costly as Berekum Chelsea stunned the Porcupine Warriors to advance to the last four of the competition.
Berekum Chelsea won 5-4 on penalties after the two teams failed to score in 120 minutes at the Len Clay Stadium in Obuasi.
Stephen Amankonah scored the winning penalty for the Blues after defender Wahab Adams failed to convert.
Kotoko should have taken the lead 10 minutes before half time break but their trusted playmaker failed to score from 12 yards when the Sarfo Taylor was impeded in the box.
That was the only real action in regulation time and the extra time also failed to produce a goal.
The winner had to be determined through a penalty shootout.
The Blues emerged victorious after scoring all their kicks while Kotoko missed one courtesy centre back Wahab Adams.
The victory sees Berekum Chelsea progress to FA Cup last four, joining Hearts of Oak, AshantiGold and Medeama who struggled to beat Attram DeVisser 3-2, also on Sunday.
Hearts of Oak will play Medeama while Ashgold meet Chelsea in the semifinals. Both matches scheduled for next month will be played at the same venue, Cape Coast Stadium.