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A repeat performance was not meant to be, as Clijsters was wide on match point to end any chance at becoming the eighth woman to repeat as Aussie champion.
Azarenka is 3-3 in her career against Sharapova, with two of those wins coming in finals.
The winner of Saturday's title match will become the new world No. 1, supplanting Clijsters' quarterfinal victim, Caroline Wozniacki. Sharapova has not held the top ranking since the week of June 8, 2007.
Kvitova beat Sharapova in straight sets to win her first Grand Slam last July, but trailed early against the three-time major titlist on Thursday at Melbourne Park.
"In the third set, I felt she always had the advantage because I was always down on my serve," said Sharapova, who piled up five double faults in the third set and 10 in the match. "I just told myself "You just gotta go for it, don't let her finish off the points like she likes to."'
The former world No. 1 Sharapova's last major title came at the 2008 Aussie Open. The Russian was the Aussie runner-up in 2007.
In doing so, Azarenka ended another memorable performance Down Under by Clijsters, who has stated she will retire after the Summer Olympics in London.
Clijsters, the 11th seed, quickly evened the match before falling behind 4-1 in the third. She held serve and trailed 40-0 in the next game before earning another break to get back on serve.
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