Playing in her first tournament since suffering knee and hip injuries at Wimbledon, the Belarussian dug herself out of a second-set hole to subdue the 2008 French Open champion, who also ran hot and cold throughout.
Australia's Samantha Stosur will face Azarenka in Sunday's showdown after the fifth seed utilised her big serve and forehand to repel French wild card Virginie Razzano 7-6 6-3 in the second semi-final.
"It's something that you expect from Ana, she's a very big shot maker and loves to bang the ball," Azarenka told reporters of her hard-hitting Serb opponent.
"For me the key was to not let her make those shots and be the one who was putting the pressure. I did feel more consistent."
World number three Azarenka raced through the first set, breaking the seventh-seeded Ivanovic three times, but was less than thrilled with her play in the second, where she was broken to love and conceded it with three sizzling forehand winners.
Azarenka composed herself in the third, breaking Ivanovic with a ripping forehand crosscourt winner and never giving the Serb a look at her serve.
Following her win, the double Australian Open champion is guaranteed to pass Russian Maria Sharapova for the number two ranking when they are released on Monday. Serena Williams will remain number one.
SLOW START
Azarenka has won 28 straight matches on outdoor hard courts since her 2012 U.S. Open final defeat, despite withdrawing from three tournaments during the period with injuries.
"The reality is we have most of the tournaments on hard but that's a great statistic," Azarenka said.
In the late match, Stosur was able to overcome a 4-0 deficit in the first set by overpowering her ambitious opponent to reach a first WTA final in nine months.
After recovering from her slow start, Stosur dictated most of the action and played a far more authoritative tiebreaker, winning it 7-2 with a big serve that Razzano could barely touch.
The Australian broke Razzano early in the second set and went on to seal victory when the Frenchwoman, who had needed three-and-a-half hours to upset third seed Petra Kvitova in the quarter-finals, hit a backhand long.
"I don't feel like I was playing too bad at the start to be 4-0 down but she was hitting a lot of winners and making me move a lot," said Stosur, who ripped 20 winners.
"So I thought I have to do something to change this and be more aggressive off the front foot a lot earlier in the rallies, dictate earlier, and that made the difference."
Azarenka will be a strong favourite going into Sunday's final with the top seed holding an 8-0 record against Stosur in previous meetings.
(Editing by John O'Brien)
