Netherlands goalie Blaak denied Australia a goal in the sudden death to seal the victory for Nederlands.
Glenn Schuurman put the Dutch ahead in the 9th minute and Seve Vann Ass stunned Australia in the second quarter as the Netherlands went into half-time with a 2-goal cushion.
Australia did pull one back in the dying stages of the third quarter through Tim Howard but Netherlands goal-keeper Primin Blaak had an outstanding game to deny any further opportunities to the Aussies. But the biggest twist of the match came when Australia's Ockenden Eddie found the deflection of a Dutch stick with only 26 seconds remaining in the match to make it 2-2 and stretch the second semi-final to the shoot-out.
In the shoot-off, Daniel Beale, Tom Craig and Jake Whetton scored for Australia while Jeroen Hertzberger, Van Ass and Thijs van Dam were on target for the Dutch to take the encounter into sudden death.
But it was not to be Australia's day, as Beale's attempt was saved by Dutch goalkeeper Pirmin Blaak after Hertberger scored to take Netherlands to their second consecutive World Cup final.
Netherlands will face Olympic silver medallist Belgium in Sunday's summit clash after the Red Lions spanked England 6-0 in the other semi-final earlier in the day.
World no.1 Australia will look for a consolation bronze medal when they take on England in the third-fourth place play-off match on Sunday.
Netherlands took time to get off the blocks as Australia did all the attacking in the initial few minutes but without much success.
After sitting back initially, the Dutchmen got into the groove slowly and had the first real scoring chance in the fourth minute through a penalty corner but Mink van der Weerden's flick was kept away by Australia goalkeeper Andrew Charter.
Netherlands kept up the pressure on the Australian defence and minutes later took the lead through Schuurman, who scored from close range after being set up by Jonas de Gues' brilliant run down the right flank.
Three minutes from the end of first quarter, Mirco Pruijser's deflection from Netherlands skipper Billy Bakker's long ball down the middle hit the post.
Three minutes into the second quarter, Australia earned their first penalty corner but wasted it.
Netherlands and Australia traded one more penalty corner each in the next few minutes but both the teams failed to convert the chances.
Van Ass doubled Netherlands' lead after his shot from right corner of the box went into the goal following a deflection from Australian Tim Howard's stick.
Trailing by two goals, the Australians came out with purpose after the change of ends as they attacked in numbers in search of breakthroughs.
The Dutch too matched their rivals stick for stick as the game witnessed an end-to-end battle.
Australia pulled a goal back just at the stroke of third quarter through Howard who scored from a penalty corner after their variation went wrong.
Netherlands goalkeeper Blaak had a wonderful match, inflicting brilliant saves now and then to deny the Australians.
In the 53rd minute, an alert Blaak came up with a wonderful reflex save to keep out Flynn Ogilivie's diving effort and then five minutes later the Dutch keeper made another stunning save to deny Blake Govers from Australia's fourth penalty corner.
But the Australians did not give up hope and fought till their last breath, which resulted in getting the equaliser just 26 seconds from full time through Ockenden and take the match into shoot-out.