Australia, who lost the previous three gold medal games by an average of 20 points, will meet the United States one round earlier in London after the defending Olympic champions advanced with a 91-48 win over Canada in their quarter-final.
Power forward Lauren Jackson, who became the Olympic women's all-time leading scoring leader in the game, said it would feel strange facing the Americans earlier in the tournament than they have grown accustomed to.
"It is strange, but the last four years we've had since Beijing there's been a lot of changes within our program," said Jackson, noting an influx of new players. "To get back in the semi-finals and be a medal contender is huge for us."
Center Liz Cambage powered Australia with 17 points, while Jackson's added 12 to move one point ahead of retired Brazilian player Janeth Arcain as the Games' all-time scoring leader with 536 points.
Ma Zengyu was China's top scorer with 15 points.
It was a hard-fought, close game between the familiar rivals. China led 36-35 at the intermission and trailed by only three points heading to the fourth quarter.
Cambridge took charge from there, keying a 12-2 run that propelled Australia to victory after China had tied it 55-55.
The result still represented a step forward for China, who lost to Australia 90-56 in the semi-finals at the 2008 Beijing Games and by 91-58 to them at the 2010 world championships.
"Today's game is a great game for both teams," said China coach Sun Fengwu. "We tried hard to show our ability and had our best performance."
The 31-year-old Jackson, a member of Australia's three Olympic silver medal squads, said her team has to be better in their next game.
"It was a real slug-out, we didn't really get ahead until the fourth quarter," Jackson said. "We've had to come back a few times this tournament. We don't want to be like that with the Americans because they're way too good for that."
The other two women's quarter-finals Russia held off Turkey 66-63 and will now meet France, who beat the Czech Republic 71-68, in the semis.
- Lauren Jackson