Victory for Williams means that the American sails through to the semis with three wins out of three and also means that Azarenka must win her final match against Li Na to progress and keep alive her hopes of ending the year as world number one.
In the opening match of the day, Li kept alive her own narrow chances of qualifying for the knockout stage with a 6-4 6-3 win against an off-colour Angelique Kerber.
And Sara Errani still has it all to play for after coming through 6-3 2-6 6-0 in a match littered with unforced errors and service breaks against late alternate Sam Stosur.
After their closely fought encounter in the US Open final, the eagerly awaited Azarenka v Williams clash was another tight affair and it was Azarenka who had the first big opportunity in the opening set, squandering three break points in the fifth game as big serving again came to the American’s rescue.
It seemed to take the wind out of Azarenka’s sails and two double faults were instrumental in her conceding the opening break. She regrouped well to break straight back in the next game but two further double faults again cost her the set in the most disappointing fashion, Azarenka throwing her racquet to the ground in frustration - not for the first time this week.
Having tempered her frustration it was Azarenka who got off to an early flier in the second set, securing the double break to go 3-0 up as Serena’s form dropped alarmingly. But Williams fought back in typical fashion, going for her shots with abandon to get back on parity as nerves looked to get the better of Azarenka, her game littered with unforced errors.
The set looked to be heading to a tie-break but two blistering return winners from the Williams racquet brought up three match points before yet another Azarenka double fault tamely conceded the match.
"I had too many opportunities that I didn't use," Azarenka said. "She played really well. I didn't execute well enough. For me, the key word today was discipline, which was missing.
"She's playing great tennis," Azarenka added. "She's letting her tennis speak for itself. My biggest opponent is her right now. I'll do everything I can. I might still have a chance to play against her in this tournament [in the final], so we'll see."
Chinese world number eight Li had played particularly poorly in defeat against Williams on Wednesday, while Germany's world number five Kerber had been excellent until Azarenka launched a monumental comeback in their subsequent match.
But the performances were reversed as a tired-looking Kerber served dreadfully throughout, double-faulting away several key games and losing six in a row between the two sets as she looked well off her usual speed from early in the match.
Li, meanwhile, was more consistent with her serves, winning 50 per cent of her second-serve points to Kerber's awful stat of just 18 per cent as she closed out the match at the second time of asking in one hour and 25 minutes.
Li must now beat world number one Azarenka in her last group match in order to progress from the Red Group.
Kerber, meanwhile, exits her first WTA Championships with three defeats in three matches, having lost to Williams in her opener.
The match started promisingly, with three breaks in a row favouring Kerber, more a result of some fantastic returning than poor serves.
The German looked in a good spot as she defended that break relatively comfortably, but she started to slow in her movement and appeared to lose confidence in her serve as Li gradually worked her way into the match.
The crucial break-back came at 4-3, a fantastic swerving pass from Li doing for Kerber, who was broken again while serving to stay in the set as the Chinese was gifted her third set point by a second double fault in the game.
That signalled the end for Kerber, who looked half the player she was for the first hour and a half against Azarenka the previous day, losing six games in a row as she imploded spectacularly.
There was some respite as she surprisingly broke Li at 1-5 while the Chinese was serving for the match, but it was a brief boost as the next attempt saw the 2011 French Open champion hold to love with an ace.
In the final match of the day in the White Group, victory for Errani keeps her in with a good chance of making the semi-finals in a winner-takes-all match against Agnieszka Radwanska on Friday.
Stosur came in as a standby after Petra Kvitova pulled out with a virus. And her lack of match play seemed to show early as she was broken in the opening game. Although she responded with an immediate break courtesy of an Errani double fault, the Australian conceded further breaks in the seventh and decisive ninth game with a double fault of her own.
Stosur looked a completely different player in the second set and came out with all guns blazing, hitting a dazzling array of winners from either side, breaking Errani in the first, third and fifth games en route to the second set.
With the momentum well and truly on her side, Stosur looked in the box seat to grab the match by the scruff of the neck which made her capitulation hard to explain. Unforced errors flowed from the Australian’s racquet with alarming regularity, the most bizarre of which was a second serve that ballooned off the frame of her racquet and into the crowd.
On the other side of the net, Errani was a measure of consistency and aided by some woeful Stosur play, broke three times in the final set to set up an intriguing showdown with Radwanska.
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- Angelique Kerber