There were seven changes made from Sunday's 2-1 win over Crystal Palace, with Kasper Schmeichel, Youri Tielemans, James Maddison and Kiernan Dewsbury-Hall the players to remain. Brendan Rodgers fielded a fresh back four for the second game in succession.
City made a promising start in Eindhoven. A combination of Jonny Evans and Wesley Fofana saw for former flick on for the latter on nine minutes, however the France Under-21s international was unable to react quick enough to direct the ball on target.
Neat footwork from Maddison saw him breeze past Philipp Max, André Ramalho and Érick Gutiérrez before his strike was halted by Jordan Teze. PSV immediately counter-attacked and a volley at the far post from Mario Götze was expertly tipped over by captain Schmeichel - another fine save to add to the Dane's already impressive showreel.
A significant opportunity for the Foxes followed. Nigeria frontman Kelechi Iheanacho released Harvey Barnes, however the Academy graduate side-footed wide of Yvon Mvogo's left-hand post.
Although many may have expected both sides to be cautions in the opening stages with the tie level on aggregate, there was no hesitancy in attack. This time, Max brought a cross under control on the left flank, and after advancing into the City area, the duo of Ricardo Pereira and Fofana stopped the full-back in his tracks. Fofana was there again not long after to scramble away from Ramalho.
The services of Schmeichel were called upon again on 25 minutes, with a smart diving stop down to his left preventing Joey Veerman from drilling into the bottom corner. In came an improvised set-play, which eventually fell to Mauro Júnior, who lifted well over.
However, the hosts were building momentum and were soon ahead. Tielemans gave the ball away in midfield and Götze was there to slide in Eran Zahavi, who fired low into the far corner from a tight angle to break the deadlock.
The Foxes were building a case for a leveller. When Maddison's deflected attempt looped up into the air, it looked to be heading in, but Ibrahim Sangaré hooked the ball off the line. Then, a sublime ball in from Tielemans located international colleague Timothy Castagne at the far stick, but the No.27 headed off target.
Leicester's push did not lose pace as Maddison, after good play from Marc Albrighton and Ricardo down the right, bent a right-footed strike just over Mvogo's crossbar. The visitors were still having to defend, though, with Fofana this time standing up to PSV captain Cody Gakpo.
With a big second half coming up, a double substitution at the interval saw Ademola Lookman and Patson Daka replace Albrighton and Barnes. They immediately played a part in City's next attack, though Daka was dispossessed in the PSV box in the build-up.
On 49 minutes, Schmeichel held onto Gakpo's goal-bound effort to prevent the host club from doubling their advantage. After a spell of possession for Leicester, Fofana stuck his foot in the way of Veerman's drive, with PSV remaining a danger on the break. The tie was still perfectly poised, despite the one-goal margin.
A flick-on from Gutiérrez came to goalscorer Zahavi around six yards from goal, but he was unable to force Schmeichel into a stop. Fofana read the movement of Götze brilliantly not long after, as he put in a well-timed tackle on the edge of City's 18-yard box.
The big chances continued to fall Leicester's way, too. When Iheanacho released Daka, the Zambia international sprinted towards goal, however he couldn't hit the target while one-on-one with Mvogo just after the hour mark. Sixty seconds later, Maddison's curler was tipped wide. Rodgers' men were piling on the pressure in a bid to continue their European journey.
The time for a third substitution came, with Ayoze Pérez bolstering the attack. Iheanacho was the man to make way.
Tielemans drilled off target from 25 yards out as the second leg approached the final 20-minute mark in the Netherlands, while at the other end, Sangaré blasted over under pressure from Castagne and Evans.
More defensive action from Fofana saw him race back to pinch the ball off Zahavi, and that was crucial in the next phase of play. Moments later, sublime work from substitute Pérez saw the Spaniard cut past Ramalho and tee up Maddison - and the No.10 made no mistake, firing home the leveller with under 15 minutes of normal time to play for his 14th goal of the campaign in all competitions.
Pérez almost put the Foxes ahead in the 83rd minute when he connected well with Lookman's delivery, however Mvogo made a fine point-blank save with his right glove at the near post.
Leicester were applying layers of pressure onto PSV, and it told on 88 minutes. Dewsbury-Hall found Lookman, and while Daka's shot was initially saved, Ricardo slammed home the rebound to put his side into a deserved 2-1 lead. That sparked incredible scenes in the away end, with 1,600 Foxes fans celebrating the potential of a first-ever European semi-final.
The task now, with five minutes of time added on, was to hold onto their lead. City understood their assignment, battling away in the closing stages to see out the success in Eindhoven.
Major moment
After James Maddison restored parity on 77 minutes, the Foxes were in a buoyant mood and an instinctive finish from Ricardo Pereira proved to be the ultimate winner.
Who impressed?
Gerry Taggart told LCFC Radio at full-time in Eindhoven: "I could give it to a couple of players, but for his challenges at crucial moments, and those interceptions where he needed to run across the pitch to make them, I have to give it to Wesley Fofana. He was colossal."
Where do we stand?
The Foxes will face either AS Roma or Bodø/Glimt across two legs of the semi-finals, with the first match taking place later this month.
Coming up...
City's travels continue on Sunday when they head to St. James' Park in the Premier League (2:15pm kick-off). A second league fixture continues the following Wednesday in the form of a trip to Goodison Park to take on Everton (7:45pm kick-off).
All times BST.