World number one Federer will face his nemesis on Sunday after the Briton posted a clinical 6-3, 6-2 win over Georgia's Irakli Labadze in the other semi-final.
In reaching his second Pacific Life Open final, Henman suffocated Labadze with his net rushing attack and returned serve with authority.
The British number one converted 16 of his 23 net approaches, broke the Georgian four times and committed only 10 unforced errors to 22 from his foe.
Earlier, Federer battled in searing 109 degree temperatures could not find his rhythm until late in the match. The Swiss picked up his game when it counted, however, whizzing groundstrokes toward the lines and serving with precision.
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Federer managed to fire a return at the American, who poked the ball into the middle of the court where the in-form Swiss player tracked it down before burying a forehand winner.
"That turned out to be more crucial than it seemed at the time," Agassi said.
"I felt I hit the volley the way I wanted. He looked like he was on the full stretch but
Federer then ran off three straight points against the disappointed Agassi, grabbing the break to 5-4 when the American missed a backhand crosscourt.
Federer coolly served out the match, winning with two aces after nearly two hours on court.
OUT FIRING
In attempting to win his second title here, Agassi came out firing, returning beautifully and exposing the twice grand slam champion's one-handed backhand.
Eight-times grand slam champion Agassi broke Federer to 3-2 when the Swiss double faulted and won the first set when he ripped a backhand crosscourt winner.
But in the second set Federer began to control the court with his devastating forehand and dug his way into Agassi's service games.
Federer broke Agassi to 4-1 by forcing a forehand error and won the set when the American made a mistake on his backhand.
Both men raised their levels in a spectacular third set, where Agassi fought off three break points in the opening game.
The American also fought off another break point in the fifth game and pressed the Swiss with Federer serving at 3-4.
Agassi held two break points but Federer ripped a forehand crosscourt winner and pasted a forehand down the line.
Federer, who is 21-1 this year, then ran off the next two games to reach his first Pacific Life Open final.
"He raised his game at the most crucial times," Agassi said. "One or two points was the difference in this match. I know he was a millimetre away from losing. But he's the kind of guy who never allows you to get comfortable, no matter what goes on."
SEVEN TIMES
Federer and Henman have met seven times, with the Briton winning six matches, including a 7-6, 6-1 victory in Rotterdam last month when the Swiss suffered his only defeat of the year.
Federer said he would try to play the match on his terms.
"I'm not going to start changing too much about my game," Federer said. "If he wants to win the tournament, he's got to beat me playing my game. He has to change something in his game. That's something we'll see tomorrow."
Henman said he is brimming with confidence.
"When we come out I'll put the record behind me and try to show authority on court," he said.
"I've had success against him and will try to continue that. My game matches up pretty well against him. If I let him dictate, it will be a pretty uncomfortable day. But if I stay aggressive, I think I have a pretty good shot."