In a rematch of last year's Wimbledon semifinals, also won by Nadal, Murray came out of the blocks quickly with some powerful serving and then took advantage of a couple of sloppy errors by the Spaniard to break serve in the 12th game and snag the first set 7-5.
Murray was untouchable through his first eight service games, not allowing Nadal a single break-point opportunity and putting over 60 percent of his first serves in play, many of them struck at more than 130 miles per hour.
But the momentum switched suddenly when Nadal capitalized on the Scotsman's errors to break serve in the fifth game of the second set, part of a run of seven consecutive games won.
Hitting the ball crisply from the baseline and putting more than three-fourths of his first serves in play in the middle two sets, Nadal steamrolled his way to a two-sets-to-one lead and edged closer to the final.
The world No. 1 showed no signs of let-up in the fourth set, taking an early lead and then saving two break points in the fourth game en route to his four-set win.
"It's a dream to be back in the final. I'm happy for everything," the 25-year-old Spaniard said in a post-match interview.
"I feel sad for Andy, he deserved to be in the final. It's tough for him, this match today. I played very well. To win against Andy, I have to play at my best," Nadal said after once again dashing Murray's bid to become the first British player to win Wimbledon since 1936.
Next up for Nadal in Sunday's final will be Serbia's Novak Djokovic, who will become tennis' new No. 1 player when the next rankings come out after defeating France's Jo-Wilfried Tsonga 7-6 (7-4), 6-2, 6-7 (9-11), 6-3 in Friday's first semifinal.
Nadal, who will drop to No. 2 for the first time since mid-2010, has a 10-2 record in Grand Slam finals dating back to 2005 and now has become the second-youngest player in men's tennis history to reach 13 major finals - trailing only Sweden's Bjorn Borg, who achieved that feat at the age of 24.
The Spaniard has not lost at Wimbledon since the 2007 final against Swiss great Roger Federer - a streak of 20-straight matches - although Sunday will be his first chance to defend the title because he missed the 2009 event with an injury.
Nadal, whose only other loss in a Grand Slam final was to Federer at the 2006 Wimbledon, defeated Djokovic in the final round of the 2010 U.S. Open to win the last major event that had eluded him.
He holds a 16-11 overall record against the Serb and leads the head-to-head 2-0 on grass, including a match at Wimbledon (the 2007 semifinals) in which Djokovic was forced to retire in the third set with an injury.
But he has struggled against Djokovic this year, losing all four matches they have played, including two straight-set losses on Nadal's beloved clay.