With his 23rd win in 33 matches against Federer, the 27-year-old Spaniard set up an ideal chance to win a 14th Grand Slam title and to become the first man to win all four majors at least twice in the Open era.
In mixed doubles semifinal play, Toronto's Daniel Nestor and Kristina Mladenovic of France defeated Zheng Jie of China and American Scott Lipsky 6-3, 6-1. Nestor and Mladenovic will face India's Sania Mirza and Horia Tecau of Romania in the final.
Nadal missed the 2013 Australian Open during a seven-month layoff for illness and a knee injury, but returned to win the French and U.S. Opens among his 10 titles for the season and finished the year at No. 1. He won the Australian Open in 2009, beating Federer in the final, and lost in a five-set, 5-hour, 53-minute 2012 final to Novak Djokovic after ousting Federer in the semis. In other years, he's struggled with injuries — it's the only Grand Slam tournament he hasn't won at least twice.
"It's really, really emotional for me to be back on this court, Rod Laver Arena, and to be able to play another final," Nadal said. "I think tonight I played the best match of the tournament. I go on court (against Federer) knowing that is a really tough match and if I am not playing my best, I will not have the chance to win."
At the end of the night, Federer knew he wouldn't even be the No. 1-ranked player in Switzerland next week. By reaching his first major final, Wawrinka ensured he'd replace Federer as their country's highest-ranked player for the first time.
But the 32-year-old Federer is confident of winning more majors, expecting some coaching from Stefan Edberg and continued improvement in his fitness to help after a slump in 2013, when he didn't reach any of the major finals for the first time in 11 years.
"I still think my best tennis is only ahead of me now," said Federer, who reached the Australian Open semifinals for 11 consecutive years.
Nadal is now second on the list of players reaching Grand Slam finals, joining Ivan Lendl on 19 — Federer leads the list with 24. Another Grand Slam title would lift Nadal to equal second on the all-time list with Pete Sampras, who was in the crowd for the match.
Nadal has struggled with a blister on the palm of his left hand in his last two matches, but he removed the heavy tape that affected his serve in his quarterfinal win over Grigor Dimitrov and replaced it with one square of adhesive tape. A TV camera got a close-up view of the blister when he took a medical timeout after the first game of the second set, drawing gasps and groans from the crowd.
"Too much talk about the blister. The blister is OK," Nadal said in his on-court interview. "The problem ... is the position of the blister, it's difficult." But, he said, he didn't feel any pain.
He certainly didn't show it if he did. He resisted just about everything Federer threw at him, scrambling to keep balls in play that usually would be winners.
Federer served and volleyed, he played with good touch, he played drop shots, he tried everything — even complaining to the chair umpire about Nadal's loud grunting after the tiebreaker — but his 50 resulting unforced errors doubled the number by his rival.
Left-handed Nadal hit 13 of his 28 winners on his powerful forehand, attacking Federer's one-handed backhand yet again.
"I tried a few things ... then again, Rafa does a good job of neutralizing you," Federer said. "So I guess at times I couldn't quite do what I wanted to do, but that's because of Rafa."
The first break of the match came in the sixth game of the second set, giving Nadal a 4-2 lead. That only heightened the crowd support for Federer, who got a standing ovation when he broke Nadal back to make it 2-all in the third set, immediately after dropping serve in the previous game. It noise and chants died down again when Federer was broken again soon after and Nadal finished off the match.
Wawrinka beat Tomas Berdych on Thursday night, getting an extra day off ahead of Sunday's championship match. Li Na will be hoping for third time lucky in the women's final on Saturday against Dominika Cibulkova. She has reached the finals in three of the past four years, but is yet to win the Australian title.
Sara Errani and Roberta Vinci rallied to win the last five games and successfully defended their Australian Open women's doubles title on Friday with a 6-4, 3-6, 7-5 victory over Russian pair Ekaterina Makarova and Elena Vesnina.