Caerphilly go through to the final with a 54-43 aggregate victory.
Caerphilly lost at home in the second leg of their semi-final, but had enough of a cushion to become Wales' only side to make a European club final this
season, and only the third Welsh side in history to manage it.
The brave Castletown men will face French giants Castres in the PARKER PEN SHILED final after a 26-33 loss to Petrarca Padova at Virginia Park, but a 54-43 aggregate victory.
'It's a great day in the history of the club,' coach Mark Ring said.
'It's a proud moment for me as a coach and we'll be flying the Welsh flag in the final.'
Caerphilly went into the match with an 18-point advantage thanks to their 28-10 victory in Italy a fortnight ago, but Padova trimmed that to 11 in only the fourth minute.
Winger Sebastian Francesio chipped over the defensive line, regathered the ball and scored a classy try. He added the extras himself, but Caerphilly were quick to hit back.
From the kick-off, centre Roddy Boobyer made a strong break and slipped the ball to speedy fullback Owain Ashman, who scored untouched under the crossbar. Justin Thomas converted and 14 points were on the scoreboard after only six minutes.
Winger Fabio Faggiotto came back on the angle to score near the posts, giving Francesio an easy kick at goal, but veteran winger Geraint Lewis replied by touching down inches inside the corner flag and scored again minutes later after a clever chip through from centre Rob Higgitt.
Francesio was yellow-carded in the 34th minute after a touch judge's report, but the home side could add only a Thomas penalty goal to go into the break 20-14 ahead.
With a 24-point overall lead up their sleeves, the Castletown men let their guard drop early in the second half, and scrum-half Alan Chiltern
was sent to the sin-bin by French referee Eric Darriere for a professional foul in the 46th minute.
Padova took immediate advantage and scored in the corner through Faggiotto, despite a forward pass that Stevie Wonder would have whistled
up. Francesio missed the sideline conversion and Thomas added his second penalty goal to leave the match evenly poised at 23-19 as it entered the final quarter.
Thomas' third penalty goal left Padova needing to score 25 points in the final 15 minutes - a task they had no chance of completing as their tempers frayed.
International centre Mirco Bergamasco scored after a tap penalty and Francesio converted to level the scores at 26-26, and fullback Soler scored in the last minute to give the Italian side the victory.
Caerphilly: Tries - O Ashman, G Lewis 2; Pens - J Thomas 3; Con - J Thomas.
Petrarca Padova: Tries - S Francesio, F Faggiotto 2, M Bergamasco, F Soler; Cons - S Francesio 4. Halftime: 20-14.
Yellow cards: S Francesio (Petrarca Padova 34), A Chiltern (Caerphilly 46), P Travagli (Petrarca Padova 68), Darren Davies (Caerphilly 80).