The 2011 winners proved too strong for Championship side Watford as goals from Carlos Tevez, Gareth Barry and substitute Marcos Lopes sent Roberto Mancini's men into Sunday's draw.
Mario Balotelli started on the bench after his bust-up with Mancini earlier this week and he played a role in City's final goal.
City had to wait until the 16th minute to create their first chance of the game when the ball dropped to Pablo Zabaleta inside the box and he fired in a rising shot which forced young goalkeeper Jonathan Bond into a fine save.
The home side thought they had made the breakthrough five minutes later when Vincent Kompany's shot inside the box was deflected into the net, but City celebrations were cut short by an offside flag, much to the delight of the travelling Watford fans.
City finally made their dominance count as they broke the deadlock on 24 minutes with a stunning free-kick from Tevez.
The Argentine was fouled on the edge of the box by John Eustace and Tevez picked himself up off the ground and smashed his shot into the corner past Bond.
Watford almost caught City napping straight from the kick-off as Fernando Forestieri beat the home offside trap to go one-on-one with Costel Pantilimon but the big keeper stood firm to keep out the shot out with his feet.
City doubled their lead a minute before the break with Barry getting his name on the scoresheet.
David Silva played in James Milner down the left and his cross picked out Barry inside the six-yard box and he headed low past Bond.
After a quiet second half Balotelli was brought on 20 minutes from time and he was straight into the action with a swerving shot from the edge of the box which Bond did well to keep out.
Bond again came to Watford's rescue on 75 minutes when he punched out Tevez's powerful shot.
Troy Deeney had a couple of sights of goal for Watford in the closing stages, but he was unable to test Pantilimon.
City made it 3-0 in stoppage time when 17-year-old Lopes scored his first goal for the club when he reacted quickest to fire home after Bond could only parry Balotelli's left-footed shot.