The world number one will attempt to win the season-ending tournament in Singapore for a third successive year when she faces Simona Halep on Sunday after fighting back to beat Wozniacki 2-6 6-3 7-6 (8-6) on Saturday.
Resurgent Dane Wozniacki won all three group games this week and looked set for her first victory over Williams in over two years when she took the first set in impressive fashion on Saturday.
The defending champion lost her cool in the first set of the semi-final, destroying her racquet at 5-2 down as her frustration got the better of her.
Williams responding by claiming the second set, but trailed 4-1 in a final-set tie-break before showing great character to reel of five points in a row to thwart the world number eight.
The 18-time grand slam winner said: "Caroline played a great match, it was really difficult today. I feel so bad.
"She's the only one undefeated [after the group stages] in this tournament and she deserved to win."
Reflecting on the moment in which she saw the red mist in the first set, Williams said: "I don't know how many times I hit it, but boy, that racquet will never do me wrong again, I tell you."
Halep, who beat Agnieszka Radwanska in her semi-final, consigned Williams to a 6-0 6-2 defeat on Wednesday and the American is determined to make amends for that error-strewn display in Sunday's final.
She jokingly said: "I'm excited. My goal is to win three games. That'll be my first goal. I'm going to go from there.
"Hopefully I can hold serve. That would be good. Most of all, I hope to break once."
Wozniacki was left to reflect on what might have been after a week in which she looked more than capable of winning the tournament.
"This really sucks. You know, being so close and still losing, it really sucks," she said.