
The game finished 1-1 following extra time, Philippe Coutinho equalising for Liverpool in the 83rd minute after Fernandinho had put City ahead early in the second half, and Caballero took centre-stage in the shootout.
The 34-year-old Argentine, who deputises for Joe Hart in cup competitions, saved penalties from Lucas Leiva, Coutinho and substitute Adam Lallana and although Fernandinho hit the post with his spot-kick, Yaya Toure stroked home the decisive penalty to give City victory.
On his decision to keep faith with Caballero, City manager Manuel Pellegrini said: "I'd rather lose the title than lose my word.
"A lot of media were waiting to criticise me if Willy Caballero makes a mistake. I had a lot of trust in Caballero. I am very pleased for all the players and staff, but more for him because he deserved it."
A tearful Caballero said: "It's amazing to win this cup. It is fantastic for the blue (City) people.
"It's important, emotional for me, my family, to be in this great team."
It was City's second League Cup triumph in three seasons, and fourth in total, and ensures that Pellegrini will sign off with at least one trophy before handing over the reins to Pep Guardiola. ?AFP