The talk before the event was a blockbuster final between Nadal, going for his fourth straight Grand Slam win, and Federer, who was aiming for his fifth Australian title and perhaps the only player who could stop him.
Instead, by fellow Spaniard David Ferrer and Federer is heading home. Djokovic will face Andy Murray or Ferrer in the final.
It's the first time since 2003 that 16-time Grand Slam winner Federer will not hold any of the four major trophies.
Earlier Thursday, Kim Clijsters advanced to the women's final with a comfortable win over Vera Zvonareva and will , who saved a match point en route to becoming the first Chinese player to reach a Grand Slam championship final.
Li rallied to win the first of the women's semifinals 3-6, 7-5, 6-3 Thursday after top-ranked Caroline Wozniacki served for the match with a 5-4 lead in the second set.
U.S. Open champion Clijsters dictated play from the start against No. 2-ranked Zvonareva and won it 6-3, 6-3 - repeating the result of their U.S. Open final.
Zvonareva had reached the previous two finals at the majors. And she had two break points in the eighth game of the second set but squandered both and Clijsters won four straight points to make it 5-3, then served out for the match.
Clijsters was the only Grand Slam winner to qualify for the semifinals.