The 20-year-old third seed took advantage of an erratic display by world No.1 Sabalenka to win 7-6 (7-4) 6-3 in their semi-final in Riyadh on Friday.
Gauff, aiming to become the first American champion since Serena Williams 10 years ago, will face Chinese debutant Zheng Qinwen in Saturday's final.
World No.1 Aryna Sabalenka looked out of sorts in her clash with young American Gauff. (AP PHOTO)
Sabalenka made an error-strewn start to the match as she coughed up error after error on her usually formidable forehand.
She still broke to lead the opening set 6-5, only for another forehand miss to let Gauff take it to a tie-break where the Belarusian again misfired badly.
A despondent looking Sabalenka trudged back to her seat after dumping a backhand into the net to let Gauff break for 2-1 in the second, with another break, to love, then making it four games in a row.
Sabalenka did pull one back in a marathon sixth game, squandering seven break points before finally converting the eighth, but jitters immediately resurfaced as she was broken to love again.
Again, she responded, but when Gauff forced a first match point on the Sabalenka serve, the Belarusian hit the net and the young American was through.
"I'm happy with the way I played," Gauff said in her on-court interview. "I know Aryna is always going to be a tough match so I just tried to stay in it. She's world number one for a reason."
Gauff beat Zheng in their only previous match, on clay in Rome earlier this year.
Zheng Qinwen waves to the Riyadh crowd after beating Wimbledon champ Barbora Krejcikova. (AP PHOTO)
"She's playing great tennis," added Gauff. "I'm not really nervous. The year-end is just a plus and a reward for the season that I had."
Earlier, Zheng had gone into her semi-final against Wimbledon champion Barbora Krejcikova having won 30 of her last 35 matches, and she duly powered her way to another fine win, 6-3 7-5.
The Olympic champion, continuing her amazing breakthrough season, becomes the second Asian player to reach the final of the season-ending event after her compatriot Li Na.
Czech Krejcikova had beaten Gauff on Thursday to book her place in the last four and eliminate defending champion Iga Swiatek.
But Zheng always looked in complete control, moving into a set and 3-0 lead before one poor service game let Krejcikova back in and gave her the chance to almost force a decider.
But 22-year-old Zheng forced a break of serve in the 11th game of the second set and went on to take her second match point.
"It feels so special," said the Chinese, whose first major breakthrough came when she reached the Australian Open final at the start of the year. "This is my first WTA Finals and right now I'm just in a final. That's really unbelievable.
"It was tricky because at 3-0 I think I dropped my focus, my performance went down and then she played more free.
"I didn't panic, I just said let's get back my focus. It was a really hard match for me but it just shows I'm mentally strong."
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