Town had taken an 81st-minute lead when teenager Arthur Read netted his first senior goal with a terrific left-footed shot from 20 yards out.
But the Shrimpers hit back with an equaliser two minutes from the end of normal time when Dan Potts threw himself in the way of sub Stephen McLaughlin's cross-shot, and deflected it past Marek Stech and into the top corner.
Lloyd Jones and Alan Sheehan both netted their penalties, with Southend matching them through Sam Mantom and Michael Kightly, but Aaron Jarvis and Danny Hylton saw their next two saved as the Shrimpers progressed by keeping up their 100 per cent record with McLaughlin and Shawn McCoulsky finding the back of the net to seal their progress to round three.
Nathan Jones had named a strong starting XI, prinkled with the youth of Read and Jarvis, and Luke Berry was back in the matchday squad, too.
Marek Stech was in goal with fellow members of last season's PFA and EFL League Two teams of the season Alan Sheehan, Dan Potts, Danny Hylton and Jorge Grant included in the team from the first whistle.
One of the other two selected in those prestigious sides, Berry, returned to the bench for the first time since August when he came on for the last few moments of the Carabao Cup tie at West Brom, after initially battling back from the dislocated ankle and broken leg he suffered at Colchester last Easter.
Since then the midfielder has had an operation on an old knee injury, but took his place among Jones' game changers for his first involvement at Kenilworth Road since March.
Town lined up with a back four of Frankie Musonda, Lloyd Jones, Potts and Jack Senior, with captain Sheehan anchoring the midfield. Arthur Read and Grant were either side of him, with Kazenga LuaLua at the tip of the diamond behind Hylton and Aaron Jarvis.
Southend started brightly, with Potts booked for a foul on Elvis Bwomono by the corner flag inside the opening two minutes, before centre-half Taylor Moore fired just over the crossbar after the free-kick was swung in.
Sheehan's deliveries from set pieces were soon causing consternation in the visitors' defence, his first inswinging free-kick finding Hylton, who was offside, before his first corner picked out Potts arriving free at the far post - in a move reminiscent of last season - but Moore got a tremendous block in with his head.
A minute later LuaLua was cutting in on his left foot after good work from Read, but his shot was deflected wide, before Grant sent a shot skidding along the wet surface, but inches wide of Mark Oxley's right-hand post.
Hylton's first real sight of goal came on 25 minutes when Jarvis flicked into his path, and the striker cut in from the left side of the area but dragged his shot wide of the near post.
The Shrimpers were soon enjoying another spell on the attack, left wing-back Stephen Hendrie firing narrowly wide from the left angle of the Hatters box, then captain Sam Mantom shot straight at Stech in the 36th minute.
Another Sheehan free-kick, after Grant fouled on the left, presented another opportunity for the Town as a spell of pinball in the six-yard box saw the ball break to the on-loan Nottingham Forest midfielder on the edge of the box, but this shot was screwed wide.
Southend started the the second half as they did the first, on the front foot with Musonda forced to clear off his own line as Grant inadvertently turned a right-wing cross towards his own goal, then Dru Yearwood let fly with a 20-yarder that Potts threw himself in the way of and deflected wide.
Stech had his palms warmed again from outside the area by Shawn McCoulsky on 53 minutes, but a couple of minutes later Musonda curled a beautiful cross onto Hylton's head, but the striker's effort drifted wide as he appeared to be put off by Grant arriving just in front of him.
LuaLua was starting to influence the game in a big way and the ex-Brighton winger arced a deep cross towards Jarvis, but the 20-year-old striker's far post header lacked power and went tamely the wrong side of the upright.
The Town came closest to a breakthrough just after the hour when LuaLua fashioned space for himself on the left side of the box, but found Oxley's palms in his way. The Southend keeper could only parry the ball up in the air, however, and Hylton stretched to get a header in on goal from close range, but was denied by the crossbar.
Hylton was in the thick of the action in the 68th minute when he tricked his way past his man on the right byline and flashed the ball across the goalmouth, but neither Jarvis or Grant could get the final touch.
The goal came with nine minutes of normal time remaining when Sheehan's free-kick was headed clear, but only as far as the edge of the D where Read was waiting to lash in his first professional goal.
His evening was soon over, having stayed down for treatment after every outfield player had run to celebrate with him, with Pelly-Ruddock Mpanzu coming on to replace him.
Jones made his second switch in the 87th minute when James Justin came on at left-back for Senior, and within seconds the Shrimpers were level, substitute Stephen McLaughlin's left-footed cross-shot seemingly heading well wide before it looped into the top corner off Potts.
LuaLua had a volley deflected behind as Town went in search of a winner deep in injury-time, before Southend broke and substitute Isaac Hutchinson almost steered McLaughlin's low cross in at the near post.
It went to penalties, with the Shrimpers proving spot on to go through 4-2 victors.
TOWN: Stech, Musonda, Jones, Potts, Senior (Justin 87), Sheehan (c), Read (Mpanzu 83), Grant, LuaLua, Hylton, Jarvis. Subs: Stacey, Berry, Lee, Shinnie, Isted.
Yellows: Potts, Jones, Hylton
Goals: Read 81
Penalties converted: Jones, Sheehan.
Missed: Jarvis, Hylton.
SOUTHEND: Oxley, Bwomono, Hyam (Kightly 90+4), Turner, Yearwood (Hutchinson 87), Mantom (c), Moore, McCoulsky, Robinson, Hendrie (McLaughlin 68), White. Subs: Bishop (GK), Klass, Kelman, Howard.
Yellows: Yearwood
Goals: Potts (OG) 88
Penalties converted: Mantom, Kightly, McLaughlin, McCoulsky.
REFEREE: Darren Drysdale
ATT: 1,545 (121 away)
