The hugely-anticipated clash turned into a one-sided battle, with O'Sullivan rattling through the first frame then knocking in a 115 clearance to take the second.
Higgins hit back to claim the third frame, but quickly blew a chance in the fourth frame to fall two frames behind once more.
And things only got worse for the Scot as a crucial black rattled in the jaws during the fifth frame, leaving O'Sullivan to clear up with a 65 before clinching the match in the next - the first time O'Sullivan has beaten Higgins in a ranking event for nearly five years.
"Any win against John, whether he is playing well or not, is always a feather in anybody's cap," O'Sullivan said.
"To me he is the complete player, if I am really on my game I know I can stay with him. But if I am slightly off and he's on then it is just a mismatch really because he is too good.
"If he had played well today he probably would have beaten me, but at the moment I am better at playing bad and winning.
"I am an instinctive player but John is a more technical and deliberate player, so he might struggle to manufacture shots. He has the perfect technique whereas I am a bit more like Alex Higgins - I move a bit and twitch them in or flick them in, but John can't play like that."
O'Sullivan went on to suggest that his problems dealing with the demands of the game are at an end.
"I feel like I have turned a corner in my mental attitude," he said.
"I don't get so up or so down, I know that each match is different, each day is different.
"The reality is that even if I don't feel like I am playing my best, I still manage to compete against the guys so I have to ignore how I am feeling sometimes and just accept the results."
World number two Mark Selby was outclassed by Joe Perry in their quarter-final clash, losing 5-1.
Perry, the world number 15, came out on top of two hard-fought opening frames, with both players spurning several chances.
And he then pulled clear with breaks of 83 and 54 to lead 4-0.
Selby dug in with a break of 78 to spark hopes of a fightback, but once again failed to make the most of his chances in the sixth frame after reaching 40, leaving Perry to make a break of 56 that finished off the match.
Barry Hawkins made it into the semi-finals in even more impressive fashion with a 5-0 whitewash of Marco Fu.
Hawkins made breaks of 125 and 134 to book his semi-final match against Ronnie O'Sullivan.
Perry's opponent in the last four will be China's Ding Junhui, who edged Joel Walker 5-4 in the pick of the quarter-final matches.
Superb breaks from both players decided almost every frame, with Walker taking a 4-2 lead thanks to breaks of 78, 74 and 101 in addition to claiming a scrappier fourth frame.
Ding had shown his break building form from the start as well, however, with contributions of 74 and 64 to claim two of the first three frames - and he took charge of the match with a 52 in the seventh to get it back to 4-3, before closing the match out with stunning back-to-back centuries. His 139 and 104 in the final two frames will make him a hot favourite to make it in to the final.
Saturday's order of play
Ding Junhui v Joe Perry - 13:00
Barry Hawkins v Ronnie O'Sullivan - 19:00
- Sports & Recreation
- Alex Higgins