Roberto Mancini's City side beat the Ukrainian club 1-0 at home but bowed out 2-1 on aggregate.
At Anfield a lacklustre Liverpool eked out a goalless draw with Sporting Braga to put the plucky Portuguese side through 1-0 on aggregate.
Scottish giants Rangers, the finalists of the then UEFA Cup in 2008, had been in a strong position after coming away from their first leg at PSV Eindhoven with a scoreless stalemate.
But a 13th minute goal from Jermain Lens meant it was the Dutch visitors rather than Rangers whose name went into Friday's draw.
Joining PSV, Dynamo and Braga in the last eight were Benfica, FC Twente, Spartak Moscow, FC Porto, Villarreal.
Read more of the AFP story at ABC Online ...
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