The singer rose to fourth most-likely to win following her performance, with bookies putting the Netherlands, Sweden, and Russia before her.
Australia joined the Eurovision Song Contest in 2015 and have scored consistently well each year but never won.
Since rehearsals began in Tel Aviv last week, Miller-Heidke's performance has been the subject of increasing interest.
Speaking to the media moments after progressing to the finals, Miller-Heidke said she was "absolutely ecstatic".
"Competing on the world’s biggest stage in front of around 200 million people on a bendy pole five metres tall is no small feat, but I’ve had an incredible team behind me - and below me - and would like to thank them for their support," she said.
"I can’t wait to be part of the grand final and see what all the other amazing acts are going to bring to the stage.”
Eurovision rules state audience members cannot vote for their own countries, but Miller-Heidke wooed enough voters to make the cut.
Greece, Belarus, Serbia, Cyprus, Estonia, Czech Republic, Iceland, Sand Marino, and Slovenia have also moved ahead to the finals.
There will be another semi final later this week to select ten more finalists, while host country Israel and the 'Big Five' of Spain, the UK, France, Italy, and Germany will all progress automatically.
Miller-Heidke now set to represent Australia alongside 25 other performers on Sunday.
Watch Semi Final One, featuring Kate Miller-Heidke, from 8.30pm on Thursday 16 May on SBS and SBS On Demand.
The Eurovision Grand Final will be held on Sunday 19 May at 5am (AEST) with an 8pm (AEST) replay, also on SBS and SBS On Demand.
Head to the SBS Eurovision website for all the latest news from Tel Aviv.