The second seed will meet world number one Roger Federer or Chilean Fernando Gonzalez in Sunday's final of the Masters Series tournament.
The battle between the last two winners of the French Open was close only for one set.
Spain's world number two Nadal, who succeeded Argentine baseliner Gaudio as French Open champion last year, fought back from a break down in that first set.
A combative Gaudio broke his opponent again in the 11th game to serve for the set, which the Argentine took after 78 minutes.
Nadal broke Gaudio in the fourth and again in the fifth game of the second set before wrapping it up.
The muscular Spaniard stayed on top in the decisive set courtesy of his trademark, aggressive baseline play.
