In a highly entertaining first semifinal, the home team played their hearts out but Sanjar Ahmadi did what mattered the most - scored the winner in the 10th minute of the match.
Afghanistan will meet the winner of the second semifinal between India and Maldives on Wednesday.
Nepal had their chances, including back-to-back penalties awarded in the 88th minute under controversial circumstances, but Afghanistan goalkeeper Mansur Fagiryar saved Rohit Chand's spot-kick on both occasions.
The penalty was awarded when substitute Bimal Gharti Magar collided with Mansur and fell down which prompted the Saudi Arabia referee ASAM Idham Mohammed to point at the dreaded spot.
Immediately another spot-kick was awarded but Chand's feeble shot was saved by a diving Mansur. Once the match was over, it was difficult to watch the crestfallen Nepal players who got a standing ovation from their supporters.
Buoyed by a partisan home crowd of 20000, Nepal boys dominated the proceedings for the better part of the match but failed to find the net. Nepal forwards Anil Gurung and Jumanu Rai did try to make decisive inroads but failed to execute their plans in the attacking third.
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