Azarenka had to battle hard to defeat fifth-seeded German Angelique Kerber, staving off a pair of match points en route to a 6-7 (11-13), 7-6 (7-2), 6-4 victory at Istanbul's Sinan Erdem Dome.
The Belarusian made the saves while forcing a second-set tiebreaker, which she dominated 7-2.
Kerber, meanwhile, fell to 0-2 in Group A play, losing to Williams in her first match.
Azarenka -- runner-up at last year's WTA Championships -- now needs only one more win this week to end the year at No. 1.
Her next opponent will be Williams, who battled past eighth-seeded Chinese Li Na 7-6 (7-2), 6-3.
The American improved to 2-0 in Group A while Li fell to 0-1.
Williams is seeking her third WTA Championships and first since 2009. She also boasts two runner-up finishes at the season-ending event.
Stosur replaced injured defending champion Petra Kvitova, who withdrew from the event after falling to Radwanska in straight sets.