The Serbian world number one was simply on a different level to the Spaniard, reeling off a staggering 6-2, 6-2, 6-1 victory in just 1hr 29min in front of a stunned Rod Laver Arena crowd.
Djokovic will now be considered the raging favorite to win his fourth Australian title in Sunday's decider against either Roger Federer or Andy Murray, who play their semi-final on Friday.
Djokovic was in irresistible form, breaking the hapless Ferrer's serve seven times and hitting 30 winners with just 16 unforced errors in an awesome display.
"I played incredible tennis and I felt very comfortable and very confident from the start," Djokovic said. "I wanted to be aggressive on the court but this is definitely one of the best performances I've ever had in my career."
The manner of Djokovic's mauling of Ferrer, set to become the new world number four after Rafael Nadal's injury absence, underlined the gulf between the 'Big Four' -- Djokovic, Federer, Murray and Nadal -- and the rest.
"David is experiencing the best time in his career in the last few years, he won 11 titles last year, but tonight I just played incredible," Djokovic said.
"I don't expect myself to play always this well, but I was free in my mind tonight and hopefully I can maintain that to the final."
It is Djokovic's fourth Australian Open final in six years and he is looking to become the first man in the Open era to win three consecutive Australian titles.
By reaching the semi-finals Djokovic is already guaranteed to hold on to the number one ranking when the new listing is released on Monday.
It was 30-year-old Ferrer's fifth loss in a Grand Slam semi-final and his defeat by Djokovic was only his second in 14 matches this year.
Djokovic was brutal against Ferrer, breaking his serve twice in the opening set and a single break in the next to storm to a two sets to love lead after only 63 minutes.
Ferrer was powerless to stem the onslaught even though he tried to chase down everything across the back of the court. The imperious top seed broke Ferrer twice more in the final set to wrap up the semi in double-quick time.