World number three Djokovic, who beat world number one Roger Federer in the Basel final last week, extended a brilliant run of form to set up a final against local favourite Gael Monfils, who beat Czech Radek Stepanek 6-4,5-7,6-4 in the other semi-final.
"There's not much to say about today's performance except it was perfect, you know, exactly the way I wanted it," said Djokovic.
"I was hitting winners from all over the court and really trying to keep that momentum going during the whole match," he added, summing up a spectacular performance.
Spaniard Nadal, who has not won a title since beating Djokovic in the Rome Masters final in May, looked helpless at times and will now prepare for the November 22-29 World Tour Finals in London featuring the world's top eight players.
"I didn't play badly but he played unbelievable," said Nadal, who leads 14-6 against Djokovic but has now lost their last two meetings.
"It's very difficult for me to beat him when he's playing at that level, especially on a fast indoor court," he added.
The first set was tight until Djokovic earned three break points in the sixth game, firing a backhand winner on the first. Nadal kept struggling on his serve and went on to offer his opponent three set points with an unforced error two games later. Djokovic hit a return winner on the first, wrapping up the set in 33 minutes.
The 22-year-old Serb stayed on top in the second set, winning the first two games to love and breaking Nadal in the second with a forehand winner.
Nadal, who has won the French Open four times but never this indoor event, could not recover and a near-faultless Djokovic remained in charge until sealing victory with a superb forehand on the first match point after just 76 minutes.
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