The Pretoria club fell 1-0 to Wydad Casablanca of Morocco in Rabat, leaving the tie deadlocked at 1-1 on aggregate, then lost 3-2 on penalties.
Amine Atouchi had the first Wydad attempt saved by Sundowns goalkeeper and 2016 CAF Africa-based Footballer of the Year Denis Onyango. The advantage lay with the defending champions, but not for long as the clock crept toward midnight Saturday in the Moroccan capital.
Percy Tau blazed over and Abdeladim Khadrouf, Motjeka Madisha and Achraf Bencharki scored to leave the shootout tied at 2-2 after three kicks each. Ivorian Yannick Zakri, who scored the only goal of the first leg for Sundowns, put his team in trouble with a tame effort that Zouheir Laaroubi easily saved. Mohamed Ounejam netted to nudge the Casablanca outfit into a 3-2 advantage and when another Ivorian, Bangaly Soumahoro fired the ball above the crossbar, it was all over.
The strikes of Tau, Zakri and Soumahoro left an impression that Sundowns had not spent sufficient time practising penalty taking before the return match.
Sundowns last year became only the second African champions from South Africa and the first, Orlando Pirates in 1995, made an identical exit the following year.
The Soweto Buccaneers won 1-0 at home and lost 1-0 away to Shooting Stars of Nigeria in a quarter-final and were eliminated on penalties.
Wydad advance to face 2015 runners-up USM Alger in the semi-finals with the first leg in Algeria next weekend.
The shootout injected excitement into a second leg that never scaled great heights before a near-capacity crowd in the 52,000-seat Prince Moulay Abdellah Stadium.
Wydad dominated the opening half and should have led by more goals at half-time than the one unmarked Salaheddine Saidi nodded after 26 minutes off a cross to the far post.
Several reflex saves from Ugandan Onyango prevented further damage to strangely subdued Sundowns while Laaroubi was a mere onlooker at the opposite end.
Improved Sundowns won a fair share of second-half possession, but seldom threatened to score the away goal that would probably have put the tie beyond Wydad.