With the result at Bangkok's Rajamangala National Stadium, Thailand reached their first ever AFC U23 Championship knockout stage.
The Thais finished second in Group A with four points, one behind group winners Australia, who drew 1-1 with Bahrain on Tuesday. Iraq and Bahrain were eliminated at Thailand 2020.
In the quarter-finals on Saturday (Jan 18), Thailand will meet Saudi Arabia.
Jaroensak Wonggorn's fifth-minute penalty kick following a VAR review gave Thailand the lead which was cancelled out by Mohammed Qasim after 49 minutes.
“It is great that we went through, the players have excelled and we are delighted to have made it through to the last eight,” said Japanese coach Nishino.
“As we are the host nation, the players have been very motivated. Throughout our three games in the group stage, I believe the players have absolutely proved themselves and that they will continue to do just that.
“They have held their own against very experienced sides and it has been a terrific learning experience for them."
Despite Thailand progressing from the group stage for the first time in three attempts, Nishino insisted that there is still some room for improvement.
“At this tournament, I believe the team is beginning to understand exactly how we want them to play football, the style we want to use,” he said.
“Having said that, we still need to improve specific areas of our game and we will be looking to work on our weaknesses going into the next match.”
Jaroensak admitted he felt tremendous pressure when taking the spot-kick.
“Of course, I felt the pressure when taking the penalty, but I've been in that position before and the coach had confidence in me,” said the 22-year-old midfielder.
“I had to be brave for the team, because any player can take the penalty. Coach Nishino always says the same thing in every match, that we should not be afraid because it doesn't matter who we go up against as long as we believe in ourselves.”
The Samut Prakan City midfielder added: “This is a very special feeling because this is the first time we've reached the quarter-finals but our target is not the last eight.
“We want to reach the semi-finals and the final, and also get an Olympic ticket.”
The top-three teams at the tournament will secure berths in the 2020 Tokyo Olympics.
In yesterday's (Jan 15) action, South Korea beat Uzbekistan 2-1 and Iran defeated China 1-0 in Group C.
South Korea, with a perfect record of three wins, and defending champions Uzbekistan, with four points, advance to the quarter-finals.