Fognini triumphed at the ATP 250 clay-court event 12 months ago, beating Philipp Kohlschreiber in the final, but was denied the chance to retain his title thanks to a convincing performance from the Spaniard.
Bautista-Agut, seeded third for the tournament in Stuttgart, broke his opponent in game two of the first set and was impressive on his own serve, winning 89 per cent of his first service points in the opening set.
Fognini fought back strongly in the second set, but wasted a couple of break points in game eight, Bautista-Agut reeling off four successive points to keep the set on serve.
That hold proved crucial as in the very next game, the world number 23 broke Fognini and, after recovering from 0-40 down in the 10th, eventually held out to secure his third ATP Tour final and second in quick succession after victory at the Topshelf Open last month.
He will take on Lukas Rosol in the final, after the world number 48 disposed of Mikhail Youzhny 7-6 (7-3) 6-2.
Youzhny tasted victory in this tournament 12 years ago, but there will be no repeat of that success in 2014 after Rosol produced an excellent display to reach his third ATP final.
The first set was a back-and-forth affair, with the pair trading breaks in the early stages, Rosol clinching the tie-break at the first available opportunity with a powerful forehand down the line.
The Czech was more dominant in the second set, sending down 10 aces to Youzhny's five before a break in game six handed him the initiative.
Another break in game eight sealed victory, Youzhny sending a backhand long as Rosol raised his arms in triumph.