Sakai came back from a game down to win 21-17, 26-28, 18-21, and seal his berth in the final on Sunday.
The 27-year-old Japanese will now face the winner of the match between Srikanth and World no. 1 Son Wan Ho in the final.
Prannoy, who defeated six-time champion Lee Chong Wei in the second round before taming the reigning Olympic, World and Asian Champion Chen Long in the quarter-finals, on Saturday dominated the opening game with a 8-3 lead.
The Indian continued to lead for the rest of the game and won it in 19 minutes after Sakai saved two game points.
The Japanese bounced back well into the second game to open up a 11-5 lead by the break before Prannoy fought back to draw level at 18-18, but failed to convert five match point opportunities as Sakai won the game in 32 minutes.
The decider saw Sakai marching ahead with a 6-2 lead which he extended to 11-9 at the changeover. After the breather, the World No. 47 Sakai continued to dominate the third game, opening up a six point lead at 17-11.
Prannoy managed to narrow the deficit to two points at 17-19 but Sakai converted his second match point opportunity to win in one hour and 17 minutes.
Indian fans will now pin their hopes on Srikanth, who will face Son Wan Ho in the other semi-final later on Saturday.