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A dominant second half display ensured the Blues made history once again in front of another record crowd at the Academy Stadium, as 3,459 turned out to witness City reach the final of the only domestic competition they are yet to win.
In a game of few chances, a moment of brilliance on 58 minutes separated the sides to hand the hosts the win.
The Super League champions had been frustrated by the Reds last season with Scott Rodgers’ side the only team to deny the Blues victory in the league with two draws.
This encounter proved similarly edgy with the first half a fairly even affair.
Liverpool created the first attempt as Kate Longhurst’s cross-shot struck the near post and flew wide.
City’s first opportunity arrived courtesy of positive work by Lucy Bronze, who skipped past her defender and cut back for Lawley, who curled straight at Siobhan Chamberlain.
Bronze then saw a low attempt blocked by Casey Stoney before Lawley floated a dangerous cross to the far post, which just evaded Jill Scott.
Steph Houghton flung herself in front of Stoney’s strike in the last major action of the half and both sides headed into the break level.
City gained control in the early stages of the second half and pressed for the opener.
Jane Ross turned her defender on the edge of the area but her shot lacked the pace to trouble Chamberlain, before Lawley headed Bronze’s chipped delivery wide.
Bronze then skewed over, under pressure from Ash Hodson; then the pressure finally told on 58 minutes when Lawley broke the deadlock.
The winger, who earned a first call-up to England’s senior squad earlier this month, cut inside on the edge of the area and fired low into the corner.
Carli Lloyd almost doubled the advantage, forcing Chamberlain into a smart stop before heading over moments later and then drilling wide.
Caroline Weir’s long-range effort, held well by Karen Bardsley, was the closest Liverpool came to finding an equaliser and City march on to Wembley.
City progress to the final at Wembley Stadium on Saturday 13 May, where they will face Birmingham.
The Solihull outfit defeated 2016 finalists Chelsea on penalties, following a 1-1 draw.
Tickets are available via the FA’s website.
Keira Walsh protected that four in defensive midfield, behind Scott and Lloyd.
Christiansen and Lawley operated on the wings, while Ross led the line upfront.
Manchester City Women dominate this year’s Women’s PFA nominations.
The Man City Women defender met fans at the Academy Stadium to support the Make Dreams Goals campaign
The game kicks off at 2pm on Monday 17 April, but make sure you arrive early at the Academy Stadium to get involved in the pre-match fun