Los Blancos were heading out of the competition when Riyad Mahrez sent Man City ahead in the 73rd minute of the second leg, which handed the Citizens a 5-3 aggregate lead, but Rodrygo scored twice in the final exchanges to take the tie into extra-time before Benzema won it from the penalty spot in the 95th minute.
Real Madrid have progressed to the final, where Liverpool are waiting, with Man City suffering more heartbreak in the Champions League despite being in control of the tie for long spells.
Los Blancos boss Ancelotti has now reached his fifth Champions League final, which is the most of any manager in the competition's history, having led AC Milan to the 2003, 2005 and 2007 finals, in addition to Real Madrid in 2014 and 2022.
Meanwhile, Man City manager Guardiola has suffered six eliminations at the semi-final stage of the Champions League, which is the joint-most of any head coach alongside Jose Mourinho.
Guardiola's Barcelona side fell in the semi-finals in 2009-10 and 2011-12, while Bayern were eliminated in the final four under the Spaniard's management in 2013-14, 2014-15 and 2015-16.
Benzema also created history during the second leg, as the France international made it seven Champions League goals against English teams this season, which is the most by a player in a single campaign.
The 34-year-old has enjoyed a remarkable campaign for Ancelotti's side, scoring 43 goals and registering 14 assists in 43 appearances in all competitions.
Benzema has 15 goals in 11 Champions League matches this term, including four against Chelsea in the quarter-finals of the competition before netting another three over the two legs with Man City.
Real Madrid secured the La Liga title with four games to spare last weekend by beating Espanyol 4-0, but they still have an important match against rivals Atletico Madrid on Sunday.
Man City, meanwhile, will be bidding to return to winning ways when they welcome Newcastle United in the Premier League on Sunday, with the Citizens looking to hold off firm competition from Liverpool to win the title.
Guardiola's side are currently one point clear of second-placed Liverpool at the summit and will take on Newcastle, Wolverhampton Wanderers, West Ham United and Aston Villa in their final four league games of the campaign.
Liverpool, who beat Villarreal to book their spot in the European Cup final, are still chasing a quadruple this season, but Man City can now only win the Premier League and failure to lift the trophy would see the 2021-22 campaign end in huge disappointment for the club. body check tags ::