Henman seemed headed for victory in the final set after he went 5-2 ahead but a rapturous home crowd helped Paradorn level the score to force a tiebreak, which he won 7-4.
The eighth-seeded Thai struggled as Henman called the shots in the early games and won the first set tiebreak 7-2.
Paradorn came back to take the second set after breaking Henman in the fourth game, using his powerful serves and forehand drives to rack up the points.
But in the final set, as his game appeared to be falling apart, Paradorn turned the match around to win the marathon two hour 25-minute contest in front of a packed Bangkok arena.
He now faces top seed Ivan Ljubicic, who beat seventh-seeded American Robby Ginepri 4-6, 6-3, 6-4, in the last four.
"I don't know how I did it," Paradorn told a news conference. "What I know is I was behind a lot with a small chance to get back into the match.
"I knew there would be only one break to get myself back. It was one of the best matches I've ever played."
Henman praised Paradorn for the fightback but said he was disappointed he had lost a match in which he made few mistakes.
"Those last four or five games and the tiebreak was the best tennis I've seen him play," Henman said.
"I didn't do much wrong, but he put in a lot of good returns and it was a difficult match to lose."
SAFIN RILED
A resurgent Marat Safin also reached the semi-finals after battling for more than two hours to beat German teenager Mischa Zverev 7-6, 5-7, 7-5 and reach the semi-finals.
Double grand slam winner Safin, who has not won a title since January 2005, clinched the first set tiebreak but became riled when he failed to take his chances in the second, allowing the energetic Zverev to creep back into the match.
But the Russian, a former world number one, kept his game together and broke the 198th-ranked German's serve at 5-5 to reach his third semi-final of the year.
"He was difficult to play, he had nothing to lose," Safin told a news conference. "He was serving well with good volleys and he made few mistakes in his returns.
"He was putting pressure on me all the time. I had to go to a third set and I wasn't happy."
Safin, who slipped out of the world's top 100 earlier this year, said it was too soon to tell if his career was picking up after almost two years in the doldrums.
"I'm fighting, I'm doing things right on the court, I'm still making mistakes but I'm still there," he said.
"If I continue this way I will have the opportunity to win tournaments again. I have to wait and see."
Safin will meet third seed James Blake in the last four of the indoor event after the American got through a tricky tie with Finn Jarkko Nieminen, which ended 6-2, 2-6, 7-5.
Blake cruised through the first set and looked on course for his third straight sets win of the tournament, but the fifth-seeded Finn made things tough for him.
"My serve was off and it was difficult winning points on my second serve," Blake told reporters. "He was dictating the play, but I started to feel better and came through in the end."
