World number four Murray, who before this week had not played on the ATP tour since September's US Open due to a wrist injury, cruised through the first set but lost his way in the second as Verdasco unleashed some powerful winners.
The Scot rallied to grab a crucial break of serve in the sixth game of the deciding set and converted his first match point when Verdasco miscued a shot that flew wide.
"It was very difficult in the first set but I managed to stay strong," Murray said. "I started to feel more comfortable as the game went on and was reading his game a bit better," he added.
The 22-year-old will be bidding for a sixth title of the year against Russian Youzhny in final after second seed Nikolay Davydenko squandered a one-set lead to lose 3-6, 6-4, 6-3 to his unseeded compatriot.
BIT LUCKY
Davydenko, the world number seven, remains in a strong position to claim one of two remaining places at the World Tour Finals later this month but could have clinched his berth in London by winning the indoor hard court title in Valencia.
He looked on course for a fourth victory in five meetings with Youzhny when he won the first set but the Muscovite fought back to take the second and opened a 4-0 lead in the third as Davydenko's game fell apart.
Youzhny sealed victory when his opponent netted an easy forehand and has a chance for a second straight title after he won the Kremlin Cup in Moscow two weeks ago. "It was a good game, very tough, but I was a little bit lucky," Youzhny said.
Murray and Youzhny have met only once before, with the Scot winning a semi-final on carpet in St. Petersburg, Russia in 2007. "He's played very well the last couple of months so it's going to be difficult but I look forward to it," Murray said.
Roger Federer, Rafael Nadal, Novak Djokovic, Andy Murray, Juan Martin del Potro and Andy Roddick have all qualified for the November 22-29 season-ending Tour Finals and Davydenko holds seventh spot and Verdasco eighth.
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