A 1-0 first-leg defeat was followed by another 3-2 loss in Cairo, sending the Libyans, who are managed by ex-Egypt defender Tarek Al-Ashri, through to the group stage.
Hosts Ahli thought they were on the right track when Mohamed Naguib scored to level the first-leg defeat, only for Hossam Ashour to concede a silly penalty before half time.
With the Reds needing two goals to win it, they shockingly conceded twice instead, courtesy of two stunners from Farag Abdelhafiz and Moataz Mahdi.
Ahli were dealt a blow when key defender Ahmed Fathi was shown straight red midway through the second half for a two-footed lunge.
Amr Gamal pulled one back for Ahli but it was never enough for the holders.
The record champions will now compete in the CAF Confederation Cup, in an attempt to add the title to their rich trophy room for the first time.
Egypt's other Champions League representatives Zamalek will be hoping not to face their rivals' fate when they meet Nkana Red Devils of Zambia on Sunday, with the first leg ending 0-0.
VIDEOS
Egypt center-half Naguib scores a rare goal in the 38th minute.
Three minutes later, Ashour concedes a penalty that was dispatched by Abdel-Rahman Fetori.
Benghazi take the lead against the run of play, with a thumping long-range shot from Abdel-Hafiz.
Striker Mahdi makes it 3-1 with a brilliant piece of skill and an exquisite curler.
Striker Gamal heads in a late goal to make it 3-2, following a deft Moussa Yedan cross.