But just as Sharapova appeared to have the match in her grasp, the fourth seed served her worst game. Williams broke back and took the next two games to level the match.
After an early exchange of breaks at the start of the decider, Sharapova gained the upper hand in a match dominated by long rallies and punctuated by a collection of grunts, shrieks and screams from both players.
She broke in the seventh game and came out at 5-4 to serve for the match again. This time Sharapova forged three match points but each time Williams refused to concede defeat and broke back for 5-5.
The former world No1 saved three more break points to keep her nose in front and finally Sharapova, who had spent eight hours on court in the previous rounds, cracked under the pressure.
"I gave it all I had," said Sharapova. "I played from my heart but I didn't take my chances and that's what this game is about. It could have gone either way. She got better as the match went on.
"I'm sad and it's a tough one to lose but I have a long way ahead of me. I'm 17 and I got to the semi-finals of the Australian Open. Nothing is negative."
In the other semi-final, a weary Davenport-finally overcame Dechy despite gifting her French opponent the first set in 24 minutes.
The American used her powerful serve to win a second-set tiebreak and sealed the match when Dechy surrendered her serve to love.
Davenport played a singles quarter-final and
doubles semi-final yesterday and now faces a doubles final tomorrow before Saturday's clash with Williams.
"It's been a long two days," admitted Davenport. "It was not my greatest day playing tennis but I was able to pull through.
"The tournament has been an awkward and different experience. I feel like I'm not playing that well, I'm struggling through matches, and I'm in the final. Again I was a bit lucky." Davenport has a problem with her hip and had her left thigh heavily strapped during the game.
She said: "I feel pretty tight all over but it's definitely not injured like the US Open. It's definitely a little stiff, but it's not injured."
Despite losing, Dechy refused to be downbeat.
"I was close to winning that match," said the French player. "But I don't regret anything. I played a really good match and did the best I could."
