Liverpool huffed and puffed yet again in a first half which they dominated before the second half introduction of Okazaki for Leicester turned this game on its head.
With their second shot on target of the game Leicester opened the scoring against the run of play, before Issac Slimani smashed in a second to eliminate Liverpool from the competition.
Jurgen Klopp made 8 changes from the side which drew on Saturday afternoon against Burnley.
As promised Danny Ward, Marko Grujic and Jon Flanagan came in to the side. Joe Gomez was partnered with Klavan in a rare centre-back berth.
Alex Oxlade-Chamberlain was handed his first start with Dominic Solanke and Phil Coutinho joining him in the attacking three.
The reds were utterly dominant in the first half. With almost 80% possession and enjoying nearly all the chances - Andy Robertson especially was key to all of Liverpool's inventiveness.
He was teeing up crosses with ease, and space, for Solanke and Oxlade-Chamberlain - neither who could get their chances into the net.
Coutinho was twisting and turning - revelling in his more advanced role - but his end product was not that of the player Barcelona wanted to play £100M.
A half time change for the reds - Woodburn on for Coutinho but from the whistle Leicester looked more determined.
Leonardo Ulloa was withdrawn after suffering a knock and on came Shinji Okazaki came on. Instantly he was winning the ball, nutmegging Jordan Henderson and firing away passes.
He urged the crowd on and it was he who scored the game's opening goal. A defensive mix up with Liverpool playing head tennis and Okazaki's shot took a deflection off Andy Robertson - who had been the reds best player and past the unfortunate Danny Ward.
From a throw in a short time later Islam Slimani collected the ball, ran away from Grujic (who was nervously on a yellow card) and smashed in a perfect left footed shot. There was nothing Ward could do about it.
The reds did manage to welcome on Ings, to join Solanke and Woodburn up front but there wasn't enough for the reds who were fairly turgid in the second half.
The League Cup may have lost it's importance, this may have been a changed Liverpool side but the reds should have been ahead by a few goals at half-time before the inevitable defence was beaten down.
Klopp was slumped in the dugout towards the end of the game - no doubt disappointed at the reds failure at both ends of the pitch.
Next up for the reds - a return to Leicester with different sides expected for both clubs.