City are dramatically out of the Carling Cup after losing on penalties at Spotland.
Ryan Shawcross scored his second goal in as many games, but strikes from David Perkins and Rory Prendergast put the Dale in the lead.
However a last minute Richard Cresswell goal took the tie to penalties, but the hosts won 4-2.
Tony Pulis made four changes to the line up with Jon Parkin, Anthony Pulis, John Eustace and Russell Hoult all starting.
It took the Potters just four minutes to take the lead, and again it was the on loan Manchester United star Shawcross.
The tall defender rose highest to powerfully head in Liam Lawrence's dangerous free kick after just four minutes.
The League Two side soon kicked in to gear and almost snatched an equaliser after ten minutes, however Russell Hoult pounced to block Craig Dagnall's effort.
Hoult again had to be alert to gather Glenn Murray's long range effort.
City responded and could have doubled their advantage, but Shawcross headed Lawrence's corner just over.
Jon Parkin was next to try his luck, but after neatly turning in the 18-yard box his powerful shot was expertly tipped around the post by James Spencer.
Ben Muirhead almost sensationally levelled the tie after striking a thunderous 30-yard effort which narrowly evaded Hoult's upright.
Mamady Sidibe burst on to a neat through ball from Parkin just after the half hour, and his powerful drive tested keeper Spencer.
With just five minutes of the half remaining, a scramble inside the Dale 6-yard box should have resulted in City's second goal of the evening, But Lawrence fired his effort straight at the approaching defender.
Just five minutes after the re-start the League Two side should have been level.
Adam Rundle sweetly connected with a long ball across the 18-yard box but his shot cannoned off the inside of Hoult's right hand post.
Sidibe again linked up well on the left with Lawrence, before dancing his way past a defender, but his shot was well saved down at the post by Spencer.
The second half saw chances at a premium, and John Eustace wasted City's best after glancing his header just wide, following good work on the flank by Sidibe.
With the game just minutes from the end, Rochdale grabbed an equaliser. The central midfielder played a neat one-two with Adam Le Fondre, before he smashed the ball in to the roof of the net from 16-yards.
With the game being played like a typical cup tie, the Potters could have scrambled in a late winner, but Sidibe's header was hacked off the line by Nathan D'Laryea.
Extra time began, and the hosts were dominant, Rory Prendergast smashed a shot inches wide, while a counter attack from the Potters saw Cresswell flick an effort just past the post.
With the match going from end to end, Rochdale grabbed a shock lead 11 minutes in to extra time.
Substitute Rory Prendergast spectacularly fired home a half volley beyond Hoult and in to the far top left hand corner, to send the fans behind the goal wild.
City thought they had equalised barely two minutes later, Shawcross rose highest again inside the 6-yard box and his goal ward header looked to have crept over the line, but the referee waved play on, as a defender cleared it away.
Late cup drama was to follow in the dying seconds as summer recruit Richard Cresswell grabbed a last minute goal to take the game to penalties.
Penalties:
Rochdale - Kennedy (goal)
City - Cresswell (miss)
Rochdale - Dagnall (saved)
City - Pulis (goal)
Rochdale - Prendergast (goal)
City - Lawrence (goal)
Rochdale - Muirhead (goal)
City - Dickinson (miss)
Rochdale - Jones (goal)

ROCHDALE: Spencer, Ramsden, Kennedy, D'Laryea, McArdle, Jones, Perkins, Muirhead, Rundle (Prendergast 77), Dagnall (Le Fondre 64), Murray. Subs: Rigby, Crooks, Thompson.
POTTERS: Hoult, Wright, Shawcross, Higginbotham (Wilkinson 46), Dickinson, Delap (Sweeney 54), Pulis, Eustace, Lawrence, Sidibe, Parkin (Cresswell 58). Subs: Buxton, Simonsen.


















