Azarenka, who could succeed Caroline Wozniacki as world number one when the new rankings are released on Monday, will face off against Maria Sharapova for the title on Saturday, after the 2008 champion beat Petra Kvitova 6-2 3-6 6-4.
"I felt like my hand is about 200kg and my body is about 1,000 and everything is shaking," an emotional Azarenka said after sealing victory.
"But that feeling when you finally win is such a relief, it's like 'My God! I cannot believe it's finally over', I just want to cry."
Azarenka made the better start to the match, keeping Clijsters pinned back behind the baseline and refusing to let the Belgian dictate the points.
A nervy third game from the defending champion saw Azarenka grab an early break, when she climbed all over the second serve of Clijsters, a tactic that proved successful throughout the match, and dispatched it for an inside-out forehand winner.
Clijsters set up immediate break back points but could not take advantage of any of them as Azarenka held to consolidate before riding her break to claim the first set in the 10th game.
The second set saw a completely different Clijsters take to the court, however, as she peppered the baseline with a series of huge ground-strokes to draw the errors from a clearly nervous Azarenka and secure the break in just the second game.
Another break in the fourth game saw the Belgian cruising towards a bagel second set as Azarenka lost all momentum and confidence in her shots.
The Belarusian did well to hold when serving to stay in the set, finding a new tactic when she sliced a backhand drop shot winner before sealing the game when Clijsters hit long.
The hold clearly re-established Azarenka’s self-confidence as, although Clijsters held to take the second set and force the decider, the third seed took control of the match once again early in the third.
The final set was a topsy-turvy affair with both players clearly struggling with their nerves; Azarenka attempting to reach her first Grand Slam final, Clijsters, in all likelihood, playing her last Australian Open.
All over Clijsters second serve throughout the match, Azarenka earned herself a couple of early break points when the Belgian struggled to control her own nerves. But it was a vicious forehand return off a Clijsters first serve that did the damage as Azarenka secured the break.
Clijsters has forged her reputation on never giving up and broke back immediately when the nerves returned for Azarenka and she double faulted to concede her serve.
But for every blow that Clijsters struck to peg her back, the Belarusian was able to bounce back and sneak ahead again, immediately re-establishing her break lead, when Clijsters slapped down a double, before holding to consolidate.
With the overwhelming share of the crowd’s support Clijsters had one last throw of the dice, denying Azarenka on five game points before breaking back when her opponent dumped a backhand into the net.
Unable to maintain her momentum once again, however, Clijsters threw in a shocking game to gift Azarenka three more break points with a double fault. Two were saved by the Belgian but a third was one step too far when the Belarusian broke with a smash winner.
Despite missing three serves in a row on match point, Azarenka booked her place in the Championship match before falling to the ground in triumph while Clijsters quickly departed Rod Laver Arena possibly for the last time to warm applause.