Djokovic was twice down a set and appeared physically ill during the third set against the two-time defending champion Sinner at a rocking Rod Laver Arena on Friday night.
But the 38-year-old Serbian legend wound back the clock and dug deep to post a momentous 3-6 6-3 4-6 6-4 6-4 victory, which see-sawed for four hours and nine minutes and ended at 1.32am in Melbourne.
"I wouldn't dare to call it finest ever, but it's definitely the finest in the last couple of years," Djokovic told reporters.
"Under the circumstances, semis against Sinner, who has been playing the best tennis of his life the last couple of years, particularly here, two-time defending champion, it doesn't get better than this."
Djokovic, the world No.4, becomes the oldest man to qualify for an AO final in the open era and will meet top-ranked Carlos Alcaraz in Sunday's decider after the Spaniard beat Alexander Zverev in another five-set semi-final thriller.
It will be Djokovic's first grand slam final since he was beaten by Alcaraz in the 2024 Wimbledon final, while an 11th AO triumph would mean he surpasses Margaret Court as the only player to win 25 grand slam singles titles.
"It's no secret that grand slams are where I want to play my best tennis," Djokovic said.
"It becomes more difficult for me to motivate myself and I ask myself questions, 'What is it that I'm looking for?'
"I was imagining really playing against Jannik and Carlos at the final stages of grand slams this year, battling it out and really giving it all that I have.
"I'm very fortunate to already get it in the first slam of the year.
"So, yeah, big win, very proud, very happy, and very relieved as well because it was physically very demanding and gruelling."
Djokovic has been motivated by critics who've doubted his ability to reach another major final, after he was knocked out in the semi-finals at all four grand slams last year.
"I never stopped believing in myself, you know," Djokovic said.
"There's a lot of people that doubt me. I see there is a lot of experts all of a sudden that wanted to retire me or have retired me many times the last couple of years.
"You know, I want to thank them all, because they gave me strength.
"They gave me motivation to prove them wrong, which I have tonight. For me, it's not a surprise, to be honest."
Djokovic summoned up all his old trademark resilience against Sinner as he saved 16 of 18 break points.
He dropped the first set but hit back early in the second and ended the Italian's streak of 38 service holds against all opponents in the process.
Djokovic also snapped a run of 10 consecutive sets he had lost to Sinner in the past two years, which included semi-final demolitions at Roland Garros and Wimbledon last year.
But Djokovic struggled physically at times during the third set, and appeared to be sick into a towel at a change of ends, when trailing 4-3.
The rollercoaster continued as the pair traded blows in a high-class contest and Djokovic held his nerve with the match on the line.
He was handed a time violation when serving at 4-3 and deuce in the fifth set, but managed to regroup and hold before serving out the match.
Sinner kept battling right to the end, but Djokovic eventually sealed victory on his third match point to achieve his first win over the Italian since November 2023.
A four-time major winner, Sinner could have matched a feat twice achieved by Djokovic with a third consecutive AO crown.
Instead, he was left ruing a painful defeat.
"It was a very important slam for me, of course, but it can happen," Sinner said.
"It was a good match for both of us and I had many chances, couldn't use them and that's the outcome. It hurts, for sure."
