The 28-year-old from Wuhan has been irresistible during her second straight run to the Melbourne semis and has a 2-1 record over Wozniacki -- with the last win coming in the fourth round in Melbourne last year.
Tournament favourite Kim Clijsters will play Russia's world number two Vera Zvonareva in Thursday's other women's semi.
Germany's Andrea Petkovic, Li's vanquished opponent in the quarter-finals, said the Chinese world number 11 exuded an "aura" of confidence which made her favourite for a maiden grand slam crown.
"It's nothing that I can tell you -- her forehand is good or her backhand... it's just the feeling, how she is on court, her confidence and the way she's playing.
"I just feel she has a great chance to win the tournament. I don't want to put pressure on her obviously, it's just a feeling."
Li's 6-2, 6-4 win over Petkovic ensured she will return to the top 10, after becoming the first Chinese player to crack the elite group following last year's semi-final, when she was beaten by eventual champion Serena Williams.
China's number one is also unbeaten in 2011 after winning this month's Sydney International, when she shocked three-time US Open winner Clijsters in the final.
The disciplined Li's low number of unforced errors -- just 15 against Petkovic -- should help her against Wozniacki, who is known for targeting her opponents' mistakes.
"I played really well in Sydney and I hope I can do better here this year. I don't want to lose in the semis again," said Li.
Wozniacki has in turns baffled and entertained media by first pretending she was attacked by a kangaroo -- a story which went viral before it was quashed -- then appearing at a press conference with a blow-up kangaroo and boxing gloves.
The 20-year-old Dane remains wary of Li, after falling to the Chinese at last year's Sydney International, and then in the round of 16 at the 2010 Australian Open.
"I think Li Na has improved a lot, but I also believe I have," Wozniacki said. "I'm just going to go in there, fight for every point, and just see what's going to happen.
"I know that she can play very good tennis, but I can too. It's just a matter of who wins the most important points in that match."
Triple major-winner Clijsters faces an equally tough assignment against Zvonareva, who is in the form of her life and gunning for a third straight Grand Slam final.
The error-strewn Belgian saw off Poland's doughty Agnieszka Radwanska 6-3, 7-6 (7/4) to reach the semis, while Zvonareva stopped Czech player Petra Kvitova 6-2, 6-4.
Reigning champion Serena Williams is out after cutting her foot on glass in a bar, while her sister Venus strained a groin muscle and retired in the third round.
The tournament has also lost a succession of former world number ones, including Justine Henin, Maria Sharapova, Ana Ivanovic, Jelena Jankovic and Dinara Safina, who are all already eliminated.
Britain's Andy Murray was playing Ukrainian Alexandr Dolgopolov in the men's quarter-finals, while top seed Rafael Nadal was due to face Spanish compatriot David Ferrer later.