The pair recorded contrasting straight-sets victories on Thursday.

Sharapova was the first to book a spot in the decider, thumping fellow Russian Ekaterina Makarova 6-3 6-2 in 87 minutes.

World No 1 Williams was made to work considerably harder by fellow American Madison Keys, before finally triumphing 7-6 (7-5) 6-2 on her ninth match point.

Williams will start as a heavy favourite in the final, having won her past 15 matches against Sharapova over the last decade.

Keys, a teenager showing no nerves in her first major semi-final, pushed Williams into a tie-break in the first set on Thursday and saved two set points with aces, only for the 18-time grand slam champion to prevail at the third attempt.

In the second set, the 19-year-old saved seven match points in a marathon seventh game which lasted for 11 minutes, forcing Williams to serve the match out.

Williams needed an ace on her ninth match point to finally close out the semi-final after one hour and 24 minutes.

"I'm really excited to be in the final again," said the 33-year-old Williams, a five-time Australian Open champion whose most recent title at Melbourne Park came in 2010.

"I didn't come here with that expectation, so it's really exciting."

Williams paid tribute to Keys, whom she will team up with next week in the Fed Cup.

"I think she's going to be winning this tournament very soon and lots of other grand slams," said Williams.

"She pushed me really hard in the first set and I had to really dig deep mentally to get through that.

"I don't know how many [match points] it was but she came up with some great shots every time.

"She played so well when she was down and she never ever gave up."

Sharapova has only dropped one set in six career meetings against Makarova, who came into Thursday's match in career-best form, having reached the semis at each of the last two majors.

When Sharapova - who won her sole Australian Open title in 2008 - had to fend off two break points in a long opening game on Thursday it looked as though she would be in for a tough battle.

But the 10th-seeded Makarova dropped her opening service game and despite breaking back in the seventh game, Sharapova was able to steady and win the opening set in 48 minutes.

The second set was largely one-way traffic, with Makarova unable to put the No 2 seed under any consistent amount of pressure.

"It's so special," said the 27-year-old Sharapova. AAP