Sharapova, a former world number one now ranked ninth who has had a poor year by her high standards, has shown glimpses of her dominant best on the clay in the Spanish capital this week with the French Open starting in Paris later this month.
Pole Radwanska, the world number three, struggled to cope with the Russian's powerful ground strokes as Sharapova, runner-up to Serena Williams in Madrid last year, took a step closer to a 31st career title.
After comfortably winning the opening set and racing into a 3-0 lead in the second, Sharapova had to deal with a spirited Radwanska fightback when she won four games in a row before prevailing to secure a meeting with Halep, the fourth seed.
The 22-year-old Romanian fought back from a set down to oust fifth-seeded Czech Petra Kvitova 6-7(4) 6-3 6-2.
Sharapova's chances of going one better than 2013 were boosted when Williams, the Madrid champion the past two years, withdrew on Friday with a thigh injury.
"I've done a really good job of transitioning from the hard to the clay and really improving physically and recovering well from match to match," Sharapova told a news conference.
"I really challenge myself to improve on clay courts because that was never my favorite surface in the beginning of my career," added the 27-year-old, French Open champion in 2012.
"I feel really good physically. I put in a lot of matches in the last few weeks but that's what I want.
"I missed four or five months of the season last year (with a shoulder injury) and I wanted to come in to this year and play as many matches as I can."
By reaching the final, Halep has already achieved her best result at a WTA premier event as she chases an eighth career title.
A girls singles champion at the French Open in 2008, she also looks to be hitting form on clay ahead of claycourt major.
"I'm very excited that I can play my biggest final tomorrow, I hope that my emotions will be down and I can play," Halep told a news conference.
"It was a very tough match today, I couldn't believe that I came back again.
"Tomorrow I expect another very tough match. Maria is a champion and she knows how to manage the finals."