Azarenka, the world No. 1, beat 29th-seeded Sloane Stephens 6-1, 6-4 despite play being stopped as she received medical treatment. Li, the No. 6-seed, rolled by Maria Sharapova, who had lost just nine games in her first five matches in Melbourne, 6-2, 6-2.
Azarenka and Li will square off in Saturday's women's singles final. Azarenka will be in her third final in the last five Grand Slam tournaments. She won in Australia a year ago -- beating Sharapova in the final -- and was in the final at the 2012 U.S. Open, losing to Serena Williams.
Azarenka has won the last four times she's played Li, taking a 5-4 lead in their career series.
Azarenka pulled out to a 4-1 lead Thursday before winning the first set and was ahead 5-3 and serving in the second. Stephens fought off five match points in the game and got the break. But Azarenka had to leave the court to have her ribs and left knee checked. When she returned, the players traded points until, on the eighth point, Azarenka converted her sixth match point.
Li opened her match with a service break and soon was up 4-1. Sharapova got one of the breaks back but Li took a lengthy game for a third break and quickly finished off the first set. Li won the last four games of the second set in gaining the finals berth.
Sharapova, who had been exceptional in the first five rounds, had 32 unforced errors -- including six double faults -- against just 17 winners.
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