Newcastle raced out of the blocks. Rolando Aarons got down the left hand side and played in Aleksandar Mitrovic, who slammed home from 12 yards.
Forest did come back into it, and Jason Cummings had a few shots at goal, but Karl Darlow had the answer to everything.
At the other end, Aarons was causing serious trouble for the visitors, linking up well with Jesus Gamez on multiple occasions and putting some very dangerous crosses into the box.
That man Cummings did eventually make the pressure count when he slotted in after a nice ball from Zach Clough. Parity resumed.
It got worse for Newcastle minutes later. Cummings again finding himself with a chance and this time, he beat the goalkeeper with a lovely chipped finish.
They did manage to level the game after a stunning strike from Aarons. The winger cut onto his weaker right foot and blasted a shot into the top left-hand corner. He was easily the stand-out player for the Magpies on the night.
After the restart, it was again Aarons who looked most like creating something going forward. He got down the left again but nobody was there to get on the end of his cross.
Jacob Murphy had a great chance, and only for Forest keeper Jordan Smith's excellent reflex save, Newcastle would have retaken the lead.
The home side dominated the second half, but lacked a cutting edge that will seriously come back to haunt them this season. Murphy and Mitrovic had chances, but both failed to find the net.
Matt Ritchie and Isaac Hayden were called upon in an attempt by Rafa Benitez to seal the game within the 90 minutes.
Ritchie did come close to doing so, but his left foot curler was a yard wide of the right-hand post.
Extra-time was always going to be nervy, but St James' Park was stunned into silence when substitute Tyler Walker nudged home Forest's third goal of the night. 2-3.
Newcastle United are very low on confidence right now and they never really seemed likely to equalise after that. Another early cup exit under the stewardship of Mike Ashley.
I have never known a team to bounce back up to the Premier League and have such a dark cloud looming over it. It really is worrying times for all Newcastle United supporters.