The match started at a frantic pace from both sides as they battled for possession and dominance following a delayed start at the DHL Stadium due to large number of supporters not making the 15h00 kick-off time.
In the 14th minute new Amakhosi striker Khanyisa Mayo came closest to scoring when his curling shot hit the outside of upright following good pressing from the Chiefs forwards.
Stellenbosch midfielder Genino Palace tried a tame shot that was saved by Fiacre Ntwari 35th minute but a physical battle ensued which saw 18 fouls and one shot on target for each side ahead of half-time.
In the 61st minute an accidental collision between Stellies goalkeeper Oscarine Masuluke with an onrushing Khanyisa Mayo ensued. This occurred after the keeper made a one on one save from the latter which led to the former Baroka keeper being substituted for captain Sage Stephens.
The two teams failed to retain possession and were prone to having to attempt long range efforts in order to try and break the deadlock but failed to do so until regulation time ended.
Extra-time resembled the same pattern despite an early red card to Stellenbosch defender Thapelo Mokobodi in the 106th minute, shortly after the first stanza of extra time.
Amakhosi could not seize the numerical advantage over the resilient Western Cape side leading to the inevitable penalty shootout at the DHL Stadium.
Stellenbosch substitute Andre de Jong missed the opening spot kick of the shootout but misses from Kaizer Chiefs' Western Cape-born duo Tashreeq Morris and Dillan Solomons condemned the visitors to a Round of 16 exit.
The result ends Amakhosi's three match unbeaten run and Stellenbosch's run of six matches without a victory.
Mamelodi Sundowns return to domestic action on Wednesday night with momentum on their side, but also one eye on a demanding schedule as they host Stellenbosch FC in a crucial Betway Premiership clash at Loftus Versfeld.
Genino Palace says he is enjoying being given more attacking responsibilities by head coach Gavin Hunt after scoring three goals in his last four appearances for Stellenbosch.
Pule Mmodi will enter talks over his Kaizer Chiefs future at the end of the current season, says the player's agent Parable Hlatshwayo.
Orlando Pirates head coach Abdeslam Ouaddou says his side are full of confidence heading into Saturday's Soweto derby with rivals Kaizer Chiefs.
