Nadal, 32, was in devastating form as he beat the 20-year-old 14th seed 6-2 6-4 6-0 in one hour and 46 minutes.
The Spaniard cracked 28 winners, breaking Tsitsipas’ serve six times and only facing one break point himself.
He will play either top seed Novak Djokovic or France’s Lucas Pouille – who meet on Friday – in Sunday’s final.
“It was a great match, it has been a great tournament and I have played very well every day,” Nadal said.
“Hopefully I can play better than that.”
Nadal, who triumphed at Melbourne Park in 2009, is one more victory away from winning all four Grand Slams at least twice – a feat which no other man has achieved in the Open era.
Serbia’s Djokovic is also chasing a slice of history as he bids for a record seventh men’s singles title, although he must first beat Grand Slam semi-final debutant Pouille.
You can follow the match on the BBC Sports website and BBC Radio 5 live sports extra from 08:30 GMT.
Sharp Nadal reaping rewards of break
After a number of injury problems, Nadal is playing his first tournament since losing in last year’s US Open semi-finals.
The world number two pulled out of the Brisbane International earlier this month with a thigh strain and the move has paid dividends for the 17-time Grand Slam champion.
“To start the season like this when a few weeks ago I was in Brisbane having to take a tough decision not to play there, it is difficult to imagine where I am today,” Nadal said.
“But I never stopped practising. That week of practice made me feel good.”
Nadal has looked sharp in his six matches on his way to the final and has still not dropped a set.
He has played three players – Alex de Minaur, Frances Tiafoe and now Tsitsipas – who are aged under 21 and competed in the NextGen finals.
“They don’t need me to send them a message – they are good,” he said.
“It is always a big challenge to play against them. They are a young and new generation that are already here fighting for the most important things.”
Tsitsipas, playing in his first Grand Slam semi-final, was the highest-ranked player Nadal had faced this fortnight but, with his service game and famed forehand tuned in from the start, the Spaniard had no concerns.
Nadal won 100% of the first serves he landed in the first set, backing that up with a strong 63% on his second serve, allowing him to put pressure on Tsitsipas.
After Nadal broke in the third game for a 2-1 lead, Tsitsipas produced two double faults and the Spaniard pounced for a 5-2 advantage before serving out the opener in 31 minutes.
Tsisitpas, who cut a forlorn figure in his post-match news conference, has “everything to become a great champion”, according to Nadal.
“There are not many reasons to be down when you have started the season like this, even if is normal just straight after the match not to be happy,” he said.
|Where the greats have won their Grand Slam titles|
|Australian Open||French Open||Wimbledon||US Open||Total|
‘Nadal has a talent no-one has – a talent to make you play bad’
Tsitsipas has become a global star on the back of his run in Melbourne, with his last-16 victory over Roger Federer bringing him to the attention of a wider audience.
With his entertaining style of play and colourful character off the court, Tsitsipas has emerged as a leading contender to fill the void when the likes of Nadal, Federer and Djokovic retire.
However, this was a stark, first-hand reminder that Nadal is not willing to depart quite yet.
“I was not even close to getting something,” Tsitsipas said.
“I feel like I could do better today – but it is a weird feeling. It feels like I couldn’t play better.
“He’s not the biggest server on tour, has a pretty average serve, but it’s annoying that I didn’t get close to break him at all.
“He’s just very aggressive from the baseline. That’s pretty much it.”
Tsitsipas was not allowed to settle by Nadal and once that first set flashed by him, never looked like causing another upset on Rod Laver Arena.
The second set was tighter, however, with Tsitsipas rediscovering his first serve to fight off three break points in the fifth game and eventually clinching the hold with an ace out wide for 3-2.
Nadal continued to dominate his service games, dropping just one point in his next three, serving out after pouncing again to break in the ninth game of the set.
Tsitsipas looked lost in the third set, winning only eight points, as Nadal stormed to victory.
“He gives you no rhythm. He plays just a different game style than the rest of the players,” Tsitsipas said.
“He has this talent that no other player has. He makes you play bad. I would call that a talent.”
Nadal’s route to the final
|First||James Duckworth||6-4 6-3 7-5||2hrs 57|
|Second||Matthew Ebden||6-3 6-2 6-2||1hr 56|
|Third||Alex de Minaur||6-1 6-2 6-4||2hrs 22|
|Fourth||Tomas Berdych||6-0 6-1 7-6 (7-4)||2hrs 05|
|Quarter-finals||Frances Tiafoe||6-3 6-4 6-2||1hr 47|
|Semi-finals||Stefanos Tsitsipas||6-2 6-4 6-0||1hr 46|