Luton for the final were without Darron McDonough who injured himself in training, but David Preece and Ricky Hill both returned to the side after lengthy periods of treatment.
Gus Caesar replaced David O'Leary in Arsenal's starting eleven, as the Irishman was ruled out for the final having damaged his achilles weeks prior.
The holders equalised and took the lead in quick succession through Martin Hayes and Alan Smith, but failed to seal the win when Nigel Winterburn missed a penalty.
A revitalised Luton staged a late comeback; Caesar's failed clearance led to Danny Wilson equalising, and in the 90th minute, Brian Stein scored the winner after poor defending from Arsenal.
Luton did not qualify for European football the following season, despite winning the League Cup as UEFA chose not to relax its ban on English teams.
They made light work of the opposition, winning by three goals and once more set a unique record: David O'Leary's strike meant all 10 regular outfield players each had scored for Arsenal during the season.
[9] In his match report for The Times, Stuart Jones assessed: "Having experienced northing but victory since the end of August, Arsenal are walking around with almost too much belief", and felt complacency was the only issue preventing the club from reaching the quarter-finals.
The tie was played at Filbert Street – a neutral venue – given Luton had banned away supporters from its home, Kenilworth Road as a consequence of the rioting which marred English football in 1985.
Without several senior players because of ineligibility and injury, Luton scored early through Brian Stein's strike, and then produced a solid defensive performance, reliant on goalkeeper Les Sealey to earn a place in the quarter-finals.
A mistake by Bradford goalkeeper Paul Tomlinson handed Luton the lead four minutes before the hour, when he gave away a free kick for placing the ball down before picking it up again.
[17] A shot from Danny Wilson in the 65th minute resulted in Luton's second goal; though his effort was saved by Tomlinson, the goalkeeper could not fend off the advancing Harford's header.
[18] On a wet, muddy surface, both clubs struggled to control the tempo, though Luton played the more incisive football and looked threatening in their opponent's half.
"[26] He admitted Luton's poor run of form since losing the Full Members Cup was a reason why he would make changes for the Wembley final, and noted his side's difficulty on grass away from home.
"[28] Already without O'Leary, Graham was waiting for Paul Davis to pass a fitness test before finalising his first eleven; the England international had caught a virus a week before the final and subsequently missed training.
"[28] The final was broadcast live in the United Kingdom on ITV, presented by Elton Welsby with commentary from Brian Moore and David Pleat.
[32] Mal Donaghy passed a fitness test and partnered Steve Foster in defence, while Rob Johnson was preferred as left back to Ashley Grimes.
The Arsenal defence failed to clear Preece's incoming delivery, and Foster, thinking quick, managed to slip an angled pass in Brian Stein's direction.
[36] The Luton goalkeeper was again called into action when Arsenal were awarded a set piece; Sansom slid the ball to Nigel Winterburn, whose shot was gathered.
[37] Foster made a timely challenge on Davis on the edge of the penalty area to end another Arsenal attack; Graham's team had been more threatening on right-hand flank with Rocastle and Winterburn.
[38] Harford, who had been a long figure up front for Luton, still managed to trouble the Arsenal defence with little service; near the end of the first half, he collected a pass from the left, bypassed his marker Adams and aimed his shot at goal, which went wide of the right-hand post.
His cross into the penalty area was met by Brian Stein's head, but Lukic made a crucial save, tipping the ball wide.
The stand-in goalkeeper for Luton was delighted with his role in the final, but made it pertinent that he needed regular first-team football, or he would be tempted to leave the following season.
[43] Graham felt his team "... were there when we were leading 2–1", and expressed his sympathy for Winterburn, "He is a good signing for Arsenal and to miss a penalty so close to the end was a great disappointment to him.
[44] The defeat prompted Graham to strengthen his defence over the summer; he was unable to convince his first choice Gary Pallister to join the club,[45] but managed to sign 25-year-old defender Steve Bould from Stoke.