The Sky Blues earn an extra point in the shoot-out after Jordan Ponticelli's first Coventry goal helped City to a 2-2 draw in the Checkatrade Trophy.
A late Dan Agyei leveller robbed Ponticelli of having his first Sky Blue goal a winning one, when the former City man scrambled the ball home in stoppage time.
Ponticelli found the net just moments after a Marc McNulty penalty that levelled the tie at the Banks's Stadium.
Zeli Ismail gave the home side the lead from the spot midway through the first half after being fouled by Peter Vincenti.
However, the shootout victory gives Mark Robbins' side an extra point and keeps them in the competition.
Sadlers' winger Ismail was presented with the game's first chance. The former Wolves man found an opening down the right, before cutting inside and curling his effort just short of the near post.
Stuart Beavon came close to openening the scoring after fifteen minutes. City's number 16 took the ball down on his chest well but his volley toward goal was blocked by a number of Walsall bodies and forced behind for a Sky Blues corner.
Beavon then did his best to turn provider for what was Mark Robins' side's best chance of the early stages. Beavon's cross floated nicely onto the head of Peter Vincenti who rose far higher than anyone else in the area to head his attempt towards the far corner but Maz Kouhyar was waiting on the line to hook it away. Ben Stevenson did his best on the rebound but his shot, drilled goalward, deflected agonisingly over the crossbar.
Nevertheless, it was the home side who took the lead on the half-hour mark. Vincenti was judged to have fouled Ismail just inside the area and the former Wolverhampton Wanderers wideman dusted himself off and put away the spot-kick. Walsall had the lead.
Jordan Shipley was one of ten changes made for this one, and it was his delivery that gave Vincenti a chance to make amends for his previous mistake by gifting him a free header in the area, but Sadler's 'keeper Liam Roberts was able to parry the ball away.
Vincenti had been fighting to come back from injury ever since scoring his first goal for the Sky Blues against Carlisle at the Ricoh Arena, and the wideman certianly had the best of the chances in this one coming close again to finding the back of the net just before half time, this time on the turn from distance.
Coventry were unlucky to go into the interval behind, but McNulty was able to pull City level just after the break. In his first game back from injury, the former Pompey man brought the ball down in the area and turned well, only to be pulled to the ground by Roberts and awarded the night's second penalty, which he converted with ease.
Substitute, Ponticelli came close moments later. The academy graduate lost his marker and almost go on the end of Chris Camwell's cross - any touch would have almost certainly meant his first Sky Blues goal.
The teenager would not have to wait too long for that however, when McNulty turned his defender and set Coventry two-on-one in the area. City's number ten could have easily gone alone but he selflessly shifted his body weight to cut back for the onrushing Ponticelli who with one touch fired the visitors into the lead. Safe to say, the Sky Blue army behind the goal enjoyed that one.
Walsall would have one last chance to take the game to penalties however. Agyei scored four times for the Sky Blues last season and managed to force an effort past Liam O'Brien, mid-scramble and at his third attempt. It was not pretty but it was enough to send the game to penalties.
The shootout started with a uncharacteristic McNulty penalty miss but witht he new 'ABBA' format in use it was not long before Vincenti and Ben Stevenson were able to pull City back level, part thanks to to a miss from Agyei.
Ponticelli had already made himself the hero once on the evening, and took his chance to be the hero again when he buried his spot-kick meaning Walsall's Joe Edwards had to beat O'Brien with his, which he did not, handing City an extra-point and another chance to stay in the competition.
It was a draw for City on the night, but a win in the shoot-out.
Yellow: Bakayogo (41')
Goals: Ismail (30'), McNulty (53'), Ponticelli (58'), Agyei (90')
Walsall XI: Roberts (GK), Leahy, Guthrie (C), Devlin, Morris, Flanagan, Ismail (Oztumer 68'), Bakayoko, Roberts, Kouhyar (Edwards 63'), Agyei.
Walsall Subs: Ganley (GK), Edwards, Sangha, Shorrock, Mason, Cairns.
Coventry City XI: O'Brien (GK), Di. Kelly-Evans, Grimmer (C), Hyam, Camwell, Stevenson, Maycock (Sayoud 74'), Vincenti, Beavon (Ponticelli 45'), Shipley, McNulty.
Coventry City Subs: Addai (GK), Ford, Hickman, Bayliss, Finn.