Goals from Christian Benteke and Fabian Delph helped Tim Sherwood's men come from behind following Philippe Coutinho's opener, sealing a place in the final against Arsenal.
Both teams started brightly, with Joe Allen going close for the Reds in the early stages.
Nathan Baker was forced off the field after 26 minutes with an injury and was replaced by Jores Okore.
But the young defender was caught out almost immediately as he deflected Coutinho's effort on the half-hour mark past Shay Given, much to the delight of Liverpool's ecstatic supporters.
However, the Reds' joy was short-lived as Benteke pounced just six minutes later to level matters in the capital.
Charles N'Zogbia missed a good chance to put his side ahead in the opening minutes of the second half, before Delph latched on to a terrific ball from Jack Grealish to turn the scoreline on its head.
Alberto Moreno had to make a brave challenge in the penalty area to deny Benteke from scoring another before Gerrard fired a free-kick straight into the hands of Given.
Lovren and Gerrard went close again as Villa's defence held on, while Mario Balotelli saw a goal disallowed for offside despite replays suggesting he was on.
Despite Liverpool knocking on the door, Villa remained resilient for the four minutes of injury time, setting up a mouth-watering cup final against Arsene Wenger's Gunners on 30 May.
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Steven Gerrard could only watch as Liverpool crashed out of the FA Cup to Aston Villa
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