The 27-year-old Dane won the semi-final match 6-3, 7-6 (7-2).
Wozniacki's final appearance will be her first in Melbourne and her third in any of tennis' four Grand Slam major tournaments – the Australian, French and US Opens and Wimbledon.
She finished runner-up at the US Open in 2009 and 2014.
Mertens, Wozniacki's opponent in the semi-final, is ranked 37 in the world and was unseeded for the tournament. She was playing in a Grand Slam semi for the first time.
The Dane was dominant throughout the tie and almost sealed victory with the score at 6-3, 5-4 before unexpectedly dropping her serve from a 30-0 advantage.
She recovered from that stumble to prevail after a second set tie-break.
In Saturday's final, Wozniacki will face Romanian world number one Simona Halep, who won a thrilling second semi-final 6-3, 4-6, 9-7 against Angelique Kerber.
Wozniacki will take over the number one ranking should she defeated Halep to become the first ever Danish Grand Slam singles champion.