Hosts Al Ain caused a huge shock by beating River Plate on penalties to reach the Club World Cup final.
Keeper Khalid Essa saved Enzo Perez’s penalty as the Abu Dhabi side scored all five spot-kicks after a 2-2 draw.
Marcus Berg gave Al Ain a surprise lead but the Copa Libertadores winners hit back quickly through two Rafael Santos Borre strikes in the first half.
Brazilian striker Caio stroked in the equaliser, with River’s Gonzalo Martinez missing a second-half penalty.
Holders Real Madrid face Kashima Antlers in the second semi-final on Wednesday (kick-off 16:30 GMT) for the right to face Al Ain in Saturday’s final in Abu Dhabi.
River were heavy favourites to progress after winning their continental title by beating bitter rivals Boca Juniors in Madrid, a match moved 6,000 miles from Argentina after the original game was postponed because of violence.
But things started and ended badly against the UAE Pro League champions, who went ahead after just three minutes courtesy of Sweden striker Berg.
Although they managed to take the lead in the contest through Santos Borre’s well-taken goals, Martinez’s missed penalty in normal time proved costly.
Al Ain defeated Oceania Champions League winners Team Wellington on penalties in the first round then eased past African Champions League winners Esperance de Tunis 3-0 before despatching River to reach their first Club World Cup final.