Just days after a gruelling five-set battle with Denis Shapovalov, 35-year-old Nadal recovered superbly for his Friday morning match with Matteo Berrettini.
The world No.6 raced to a two-set lead, before the athletic Italian clawed himself back into contention.
But, the 20-time Grand Slam winner showed his experience to fight off any comeback and win the fourth set, sealing a 6-3 6-2 3-6 6-3 victory.
Just last year Nadal feared a foot problem could potentially end his prestigious career, but now he has the chance to win a record-breaking 21st Grand Slam title on his return.
Following the win, Nadal praised his opponent for pushing him to his limits.
"I started the match playing great, first two sets have been one of the best since a long time.
"I know how good is Matteo. In the third I knew at some point he's going to go for the shots. I think I didn't play a good game with my serve but he played some great shots.
"Then we need to suffer and we need to fight. That's the only way to be where I am today. It means a lot to me to be in the final again here."
The pair played under the roof of the Rod Laver arena, with thunderstorms around Melbourne creating a tense atmosphere pre-match.
It seemed to take a toll on Berrettini, who started his third-ever Grand Slam semi-final full of nerves.
The Italian's natural power makes his forehand one of the most feared in the game, but Nadal was experienced enough to exploit his weaker backhand in the opening two sets.
The 25-year-old finally found some success in the third set, managing to take Nadal out of his comfort zone with some fierce forehands.
Nadal began to tire in the fourth set, but the Spaniard still managed to win some crucial rallies and hold out for the win.
It means Berrettini is still yet to win against a top-10 seeded opponent in his career.
Meanwhile, Nadal's appearance in the final gives him the chance to win a second Australian Open, following his win in 2009.
When questioned, the Spaniard seemed relaxed about the pressure of a 21st Grand Slam title, and was simply grateful for the opportunity to be playing again.
"For me it's all about the Australian Open more than anything else. It's an amazing event. I've been unlucky with a few injuries. I was close a couple of times. I never thought about another chance in 2022."
Nadal will now take on either Stefanos Tsitsipas (4) or Daniil Medvedev (2) in Sunday's final.