The club record singing €71m refused to come off, indicating he was fine to play on, prompting a stand-off which resulted in Sarri reacting angrily and walking down the tunnel before returning.
Following on from the match, Sarri said that the whole incident was a “big misunderstanding.”
“I wanted Caballero on the pitch, but the goalkeeper wanted to let me know he was in [a] condition to go to the penalties,” he added (via the Sky Sport).
“I misunderstood the problem and only realised the situation when the doctor arrived at the bench,” he said.
“He understood I asked for a change for his physical problem. He said: ‘I haven’t a physical problem.’ And he was right.”
Kepa later echoed his manager’s words and insisted the incident was caused by “confusion”.
“It was misunderstood. In no moment was it my intention to disobey or anything like that with the boss,” said the 24-year-old Spaniard.
“It was two or three minutes of confusion until the medics got to the bench and they explained everything well.
“He thought I couldn’t continue, and – fundamentally – I was trying to say that physically I was fine.”
Speaking to Sky Sports, former Chelsea captain John Terry said he believed Sarri’s “misunderstanding” explanation was a decision taken to protect his goalkeeper.
“Whether that has been dealt with inside the dressing room, I don’t know,” said Terry.
“Publicly, that’s his approach. He’s protecting his player.”
Sarri taking about doubts over Kepa Arrizabalaga future:
“I am very happy with him and all chelsea playeres and in the last three matches we are improving and have improved a lot,” said Sarri.
“Today showed everyone we could be a very solid team because we conceded nothing to the opponents, and to Manchester City that is not easy.
“I am proud of the players. I think the club would be proud of that performance too, because the performance was very good against, in my opinion, the best club in Europe.”