Manchester City crashed from the World Cup Club when Al-Hilal took a beautiful 4-3 victory in extra time of a pulsating last 16 collision in Orlando.
Marcos Leonardo took his second goal with 112 minutes on the clock while the Saudi -Arab side produced a large upset.
Bernardo Silva gave the city a lead in the ninth minute, but the side of Pep Guardiola was punished for missing a series of opportunities such as Leonardo and Malcom replied after the break.
Erling Haaland sent the game to extra time, but City still needed an equalizer from Phil Foden after Kalidou Koulibaly Al-Hilal led ahead again.
City, who was repeatedly caught during the break, was reversed again because Leonardo had the last word and the Saudi side will now play Fluminense for a place in the semi -final.
Guardiola, who has taken the competition seriously, will display a wasteful first half.
His side quickly started with Ruben Dias who went straight to Yassine Bounou.
The opening goal soon came, although it turned out to be very controversial with complaints of handball against Rayan Ait-Nouri and Ilkay Gundogan.
Tijjani Reijnders played smart in Ait-Nouri, but the ball seemed to brush the hand of the Algerine before he crossed. Then it took two ricochets, the second of the shoulder of Gundogan, before Silva stuck along Bounou.
Al-Hilal players surrounded referee Jesus Valenzuela, but the Venezuelan was unmoved.
City should have expanded their lead for the break, but Bounou denied Savinho, Gundogan, Josko Gvardiol and Jeremy Doku.
Silva had parried a shot, but after their happiness Al-Hilal came close to Leonardo and Malcom.
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City was unable to observe those warnings and was punished when Al-Hilal struck twice in the first seven minutes of the second half.
The equalizer came when the former city of full-back Joao Annalo rode in a low cross. Ederson pushed away and Malcom’s attempt on the rebound was blocked, but the ball rose for Leonardo to go inside.
A little later City was stabbed again when Al-Hilal quickly recycled the ball from a corner they defended.
Malcom broke halfway and buried a low shot in the far corner.
City had to respond and did this like a Silva corner led to a goalmouth -scramble.
Haaland bounced up close to level, but far from sinking the nerves, the Premier League side remained vulnerable.
Malcom was brought down by Dias for what seemed like a certain fine only for an offside flag to save the city. It also took a good recovery equipment from Manuel Akanji to prevent Malcom from getting another shot and Mohamed Kanno lined a free header.
City was centimeters removed when Akanji went against the post and the follow-up of Haaland was cleared from the line.
Both parties had further attacks and Doku was withdrawn seconds before the last whistle was blown up. Guardiola ran into the field to complain, but the game went to extra time.
City, who lost to injury, was stunned when Al-Hilal lived back on the pipe with the powerful header of Koulibaly.
Yet the drama was far from past as Foden, after the couch came to replace another replacement in the ineffective Rodri, Beautiful Volley in a Rayan Cherki -Kruis.
Al-Hilal refused to lie down and scored again when Leonardo bounced to arrange the game after Niererson had pushed a header away from Sergej Milinkovic-Savic.
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