PHOTO: AFP
The world number one overcame an off-key Nishikori 6-3, 6-2, 6-4 in two hours, seven minutes on Rod Laver Arena to reach the last four.
Djokovic will now face 17-time Grand Slam champion Federer in their 45th meeting with each player winning 22 times so far.
It will be 10-time major-winner Djokovic's 29th Grand Slam semi-final and sixth in Melbourne.
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"It's always a great challenge to play Roger," Djokovic said of Thursday's semi-final. "You don't need to spend any words on his achievements, what he's done for the sport.
"He's a great champion, I have a lot of respect for him and we're going to have a good match."
Djokovic, with his win over Nishikori, is on a 19-match Grand Slam winning streak and has not lost at a major tournament since he was defeated by Stan Wawrinka in last year's French Open final.
The Serb's longest Grand Slam streak stands at 27, which took in the titles at 2011 Wimbledon, the 2011 US Open and the 2012 Australian Open, and a runner-up finish at 2012 Roland Garros.
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Seventh seed Nishikori beaten Djokovic in the 2014 US Open semi-finals but he was well off the pace against the Serb in their Melbourne quarter-final.
Djokovic only hit 11 groundstroke winners in disposing of Nishikori, who made a total of 54 unforced errors and had his service broken six times.
Nishikori looked well off his game and lost his service at 3-2 in the first set with a badly miscued double-fault.
Djokovic strung together nine straight points to take a grip on the set and wrapped it up off an overhit Nishikori forehand on set point.
The match deteriorated with both players guilty of volleying errors, but Nishikori's early service break proved decisive as Djokovic took a two sets lead with a strong first serve.
The world number one came under pressure after losing serve in the second game of the third set, only for Nishikori to hand back the break with a long forehand on break point.
Djokovic was again broken as Nishikori battled to get back into the contest at 3-1, only for the Japanese hope to again drop his next service.
Nishikori lost his third straight service game as the top seed powered to victory on his third match point with a lightning backhand winner.
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