Man Utd will play Man City for a place in the Carabao Cup final, with Leicester and Aston Villa battling it out in the other semi-final.
Carabao Cup quarter-final match reports
The Carabao Cup has resided in Manchester for the last four years, with City winning three of the last four and United the other, and the city will again have a representative at Wembley.
Ole Gunnar Solskjaer's side came out on top in their recent Premier League meeting, coming out 2-1 winners at the Etihad in their best performance of the season, but now Pep Guardiola's side get the chance to exact revenge.
United had to wait until the second half at Old Trafford to finally break down a stubborn Colchester United in their quarter-final, with three goals in 10 minutes doing all the damage in a 3-0 win.
After some genuine struggles, things finally start to be looking up for Solskjaer, and beating City over two legs would be another huge step in their road back to the top.
Solskjaer told Sky Sports: "We always want to win trophies and we want to win games. We've got a nice little draw coming up so it'll be exciting times coming up.
"I don't think anything is written in the stars. We just work hard and you take what you get and you do the best out of it. We've shown before we can do well against City."
City, though, are the double defending champions of the Carabao Cup and Guardiola will be keen to make it three in a row, so his team selection for the Manchester derby parts two and three will make interesting reading.
The holders were given a good examination at a wet and windy Oxford, with Matty Taylor's strike in the first minute of the second half cancelling out an opener from Joao Cancelo.
Raheem Sterling quickly restored City's lead and he sealed the victory later on to ensure that theur long unbeaten run as kings of the Carabao Cup continued.
Leicester to face Villa after penalty win
Leicester looked in total control at Goodison Park against Everton when James Maddison and Jonny Evans put them 2-0 up inside half an hour, leaving former Liverpool boss Brendan Rodgers beaming on the touchline.
Tom Davies and a stoppage time strike from Leighton Baines saw Duncan Ferguson jumping for joy and hugging ball boys again as the hosts forced the game to penalties.
Step forward Peter Schmeichel, who saved the first two Everton penalties from Cenk Tosun and Baines, allowing Jamie Vardy to later seal the victory 4-2.
The Foxes will now face local rivals Aston Villa for the right to meet one Manchester club in the final at Wembley, after Dean Smith's side defeated Liverpool's youngsters 5-0 on Tuesday.
Carbao Cup semi-final draw
- Man Utd v Man City
- Leicester v Aston Villa
Two-legged ties: w/c Jan 6; w/c Jan 27