Striker Danny McKee - on loan from Glentoran - was the hero for Ards as he scored a brace before netting the winning penalty as the Championship One leaders produced a dramatic comeback to knock out Coleraine and set up a final with holders Cliftonville.
A double from the on-form James McLaughlin had seemingly ensured Coleraine had one foot in the final but McKee struck in the 65th and 85th minute to dramatically drag the tie into extra-time.
McKee thought he'd completed his hat-trick in extra time but he was narrowly ruled offside, while Ian Parkhill had a shot cleared off the line for the Bannsiders.
Ards netted all five of their penalties in the shootout, while James McLaughlin was the only Coleraine player to miss - striking the post with his effort.
Niall Currie's men will meet Cliftonville in the Saturday 13th February decider, as Jay Donnelly's strike two minutes into injury time was enough to see off the challenge of nine-man Warrenpoint Town, who had Mark Clarke, Liam Bagnall and boss Barry Gray all dismissed.
The Reds have won the last three trophies and will be strong favourites going into the decider, which is Ards' first major final since 2004.