Djokovic ensured he will topple Nadal at the top of the ATP's latest rankings earlier Friday after a stylish 7-6 (7/4), 6-2, 6-7 (9/11), 6-3 semi-final win over Jo-Wilfried Tsonga on Centre Court.
A few hours later, top seed Nadal joined Djokovic in Sunday's final after shattering Andy Murray's Wimbledon dream with a comprehensive 5-7, 6-2, 6-2, 6-4 win over the British fourth seed.
Nadal's victory means the Spaniard will be given an early opportunity to remind Djokovic that he may only have a temporary lease on the number one spot as he chases an 11th Grand Slam title.
Nadal leads 16-11 in matches against Djokovic, although the Serb has won all four of their encounters this year.
"For me it's a dream to be back in the final," said Nadal after his win over Murray. "I feel sad for Andy, he deserved to be in the final. It's tough for him to lose this match today, but I wish him all the best for the rest of the year.
"I think I played very well. To win against Andy I had to play my best tennis and today I played my best tennis."
"It will be really difficult for me but I will try my best as always."
Murray meanwhile was left bitterly disappointed after falling in the semi-finals for the third consecutive year, a defeat that ensures Britain's 75-year wait for a men's Wimbledon champion goes on.
Earlier, an ecstatic Djokovic said reaching the final and gaining the number one ranking represented the realisation of twin childhood dreams.
"It's difficult to put into words," said Djokovic. "This is one of the best feelings I've had on a tennis court. My dreams are coming true -- into my first final at Wimbledon.
"I've been working all my life for this. I've been dreaming about playing the final in Wimbledon since I started playing tennis when I was four, so to be there in the final on Sunday will be fantastic."
Tsonga meanwhile said Djokovic would be a worthy world number one after a season which has seen him reach the last four of all three Grand Slams, a run which included his second Australian Open crown.
"I think he's the best player in the world for the moment. He won the Australian Open. He got to the semis at Roland Garros. And now he's in final here," Tsonga said. "So he's maybe the best."
"I can beat everybody today, but not Djokovic, because he just played unbelievable," said Tsonga. "He was everywhere. He returns unbelievable -- all the time on his baseline, so it's tough."
Djokovic had lost in five of his seven previous encounters against Tsonga, who had advanced to the last four with a stunning five-set quarter-final victory over six-time champion Roger Federer.
But despite a spirited third set fightback from Tsonga, Djokovic maintained his composure to close out a deserved victory in 3hr 7mins.
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