Rybakina won their semi-final 7-6 (7/4), 6-3 and will meet Aryna Sabalenka or Magda Linette in Saturday's final.
Azarenka, who won the Grand Slam in 2012 and 2013, was beaten in 1hr 41min in blustery conditions on Rod Laver Arena.
The 22nd seed Rybakina had already beaten reigning French and US Open champion Iga Swiatek in the fourth round and 2017 Roland Garros winner Jelena Ostapenko in the quarter-finals at Melbourne Park.
And after a tight first set, the Moscow-born 23-year-old stretched away to account for a third Grand Slam champion.
"I'm super happy to be in the final. Today it was a bit tougher for me because it was different conditions," said Rybakina, who represents Kazakhstan.
"I couldn't play really aggressive tennis. The ball was not going so much, but I'm happy that in the end I managed to win.
"I'll try my best in the final of course."
Rybakina won in straight sets when the pair played at Indian Wells last year, their only previous meeting.
Veteran Azarenka, 33, was largely on the back foot again against the grace and power of Rybakina, who was in her first Melbourne Park semi-final.
Rybakina reached the last four largely on the back of her powerful serving, having struck 35 aces in her five matches at Melbourne Park, more than any other player.
She started with a nervy double fault but soon was back in the groove, launching three booming aces in a row to secure the opening game.
Azarenka withstood an early assault from Rybakina's heavy, deep groundstrokes to force the first break point, which she converted with a high volley, only for her opponent to strike straight back.
Now powering winners off both wings and utilising her wide reach, Rybakina broke a second time for 5-3.
Trying to close out, the Kazakh's first serve deserted her. Azarenka saved a set point then created two chances of her own, converting the second.
At 5-5 Rybakina's second double fault gave 24th seed Azarenka three break points.
Rybakina showed why she is already a Grand Slam champion by averting the crisis and sealing the game with her sixth ace.
In a tight tiebreak Azarenka went long at 4-5 to give Rybakina two set points. She needed only one to go ahead after exactly an hour of play.
The aces and winners kept coming at the start of the second set, Azarenka getting more frustrated as she was broken to love to go 2-1 down.
Two double faults from Azarenka then gave Rybakina another opportunity, which she took for 5-2 and a chance to serve for a place in the final.
Nerves crept in on Rybakina's normally reliable serve and a double fault gifted Azarenka a chance to extend the contest, which she took with a backhand return winner.
Rybakina was not to be denied and broke again to reach her first Australian Open final.
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