The Argentine world number 11 stretched his unbeaten record over Gasquet to seven matches with an authoritative 6-4, 6-3 win in 74 minutes.
Nalbandian, who has won nine career titles, will play either top seed Novak Djokovic or unseeded Finn Jarkko Nieminen in Saturday's final.
Nalbandian is making his first Sydney appearance and beat Michael Llodra and four-time champion Lleyton Hewitt prior to downing the 25th-ranked Gasquet, who was a losing finalist in Brisbane last week.
"I've just been improving game by game, match by match," Nalbandian said.
"I felt today I played much better than the first one and yesterday, so it looks like every day I have more feeling on the ball and on the game.
"So it's good playing a few matches and to be in the final here."
The last Argentine to reach the Sydney final was Juan Ignacio Chela in 2002 when he lost to Roger Federer.
Gasquet, who beat defending champion Dmitry Tursunov and second seed Gilles Simon to reach the last four, was playing in his second Sydney semi-final in three years, having lost to Spaniard Carlos Moya in 2007.
Nalbandian is seeded 10th in next week's Australian Open and has been drawn in Roger Federer's lower half of the men's singles draw.