Two missed penalties in the shoot-out by Papy Faty and Terror Fanteni saw the Clever Boys miss out on a semi-final spot in the competition.
Luyolo Nomandela scored with the fifth penalty for the visitors to win.
The first 45 minutes produced very little goal mouth action, but despite the lack of play in front of goal, Wits were certainly the better team as they passed the ball around confidently with the backing of their home support.
Neither side was able to create a clear-cut goal scoring chance in the first-half.
Wits did create the first opening as in the fourth minute when Mzikayise Mashaba produced a good cross from the wing, but no one was there to tuck it home for the Students.
Stars were virtual spectators for the first half hour and only created their first chance on goal in the 36th minute as Dove Wome created some space down the wing, but his cross found no one in the box as the ball harmlessly went out for a throw-in.
The best chance in the first 45 minutes fell to Free State Stars in the dying seconds of the half as Moeketsi Mvula headed over from close-range from a right wing cross.
Stars started the second 45 in a more positive manner and Katlego Mashego hit the crossbar in the 50th minute.
In the 73rd minute Calvin Kadi thought he had broken the deadlock when he found the back of the net, but his goal was disallowed as he was ruled offside.
Three minutes from time, Stars looked the better side and again they looked like they had grabbed the winner, but Wome’s effort bounced off the crossbar for the second time.
As no team could find the winner in the 90 minutes the game moved into extra-time.
The same kind of temperament persisted throughout extra-time as neither side could score and the match moved into a penalty shoot-out.
In the end Free State ran out winners, beating Wits 4-3 in the penalty shoot-out.