The German was 0.361 of a second quicker than Mercedes' Lewis Hamilton, who is nine points behind in the sport's first title battle pitting two four times world champions against each other.
Hamilton, who has yet to win this season, was sandwiched between the Italian team's cars with Vettel's Finnish team mate Kimi Raikkonen third fastest on an overcast afternoon on the shores of the Caspian Sea.
"Where is the weakness?" Hamilton asked over the radio, searching for more speed but struggling for grip. "Turn 16 and a little bit Turn Two," the Briton was told.
Vettel's time of one minute 43.091 was slower than Australian Daniel Ricciardo's Friday best of 1:42.795 for Red Bull but temperatures were cooler.
It marked a strong turnaround for Ferrari with Vettel, who will be chasing his third pole position in a row, struggling to break into the top 10 on Friday.
Ricciardo, last year's winner in Baku who also triumphed in China two weeks ago, was only 12th in the final session before qualifying.
His 20-year-old Dutch team mate Max Verstappen, whose season so far has been littered with spins and collisions, kept out of trouble and put in a late lap to finish fourth fastest.
Hamilton's Finnish team mate Valtteri Bottas was fifth.
Force India's Sergio Perez continued his team's improvement with the sixth fastest lap, with Kevin Magnussen seventh for Haas and Canadian Lance Stroll, third in Baku last year, lapping eighth quickest.
His Russian team mate Sergey Sirotkin was 10th but crashed into the wall at turn three late in the session, bringing out the red flags to halt the track action. The car's right-front suspension looked badly damaged.
"I'm OK. Sorry for that," said the rookie.
(Reporting by Alan Baldwin, editing by Ken Ferris)
