In a stormy semi-final clash, Algeria ended the game with just eight players as Egypt avenged their painful World Cup qualifying defeat against their North African rivals last November.
Victory also extended Egypt's unbeaten run in the championship to 18 games.
On Sunday, the Pharaohs will on Ghana, who pipped Nigeria 1-0 in the other semi-final.
Egypt took the lead in the 39th minute through a penalty by Hosni Abdrabou after Emad Motaeb was brought down by Rafik Halliche inside the box.
The big Algeria defender saw red for his second booking of the night.
Mohamed Zidan extended Egypt's lead in the 65th minute when he let fly from 15 metres beyond a diving goalkeeper Faouzi Chaouchi.
Soon after Nadir Belhadj became the second Algerian player to be sent off after a vicious two-footed tackle on Ahmed Al-Muhammadi.
Substitute Mohamed Abdel Shafi put the game beyond the Desert Foxes of Algeria on 81 minutes when he found the back of the net from a very tight angle on the left.
Algeria's woes were compounded in the 86th minute when goalkeeper Chaouchi was also sent off after he launched a wild kick at a goal-bound Mohamed 'Gedo' Nagy.
Supersub Nagy made it 4-0 in stoppage when he slammed the ball past replacement goalkeeper Lamine Zemmamouche.
Egypt assistant coach, Shawki Gharib, said they deserved to reach their third consecutive Nations Cup final.
"We are a great team and deserved to be in the final again because we defeated three World Cup finalists (Nigeria, Ivory Coast and Algeria) to get there. We also scored 10 goals in three matches," he said.
Gharib dismissed suggestions that Benin referee Koffi Codjia decided the outcome of this much-anticipated clash.
"Refereeing mistakes are part of the game and it is because of these mistakes that we are not going to the World Cup. We have suffered from mistakes by referees in the past," he argued.
However, Algeria coach, Rabah Saadane, blasted the referee's performance.
"The referee decided the outcome. There was a plan against us when he gave our best defender (Rafik Halliche) a red card for what was not a penalty," said Saadane.
"And when we had to play with three men down, it was impossible to come back against a team like Egypt, who play the ball around very well."
Saadane added he was consoled by the fact that his team improved as they progressed in the tournament and this experience will stand them in good stead at the World Cup in June.
"This is a young team. Experience here will prepare us very well for the World Cup," he said.
After a rather cautious first half, Algeria tried to come out of their defensive shell and attack Egypt.
Belhadj now began to attack from the left but it was Egypt who came close to doubling their first-half lead when Sayed Moawad got to the end of a loose ball, raced into the box only to be denied by a timely tackle by an Algerian defender.
On the hour mark, Essam El-Hadary pulled off a splendid save off Mourad Meghni, whose free kick was heading into the top corner before the veteran goalkeeper stretched full length to push it away for a corner.
Egypt's response was quick as three minutes later, several players including Ahmed Hassan, failed to connect home from inside the 18-yard box, before Zidan broke his goal scoring duck at this tournament with a superb effort from just inside the box.
In the 76th minute skipper Ahmed Hassan would have got his name on the scoresheet in his 171st international, but his shot from inside the box missed its target with the Algerian goal at his mercy.
After Egypt?s humiliating defeat by Algeria in Khartoum
less than three months ago, the National Football team has exacted
revenge by beating their old enemies 4-0 in Angola on Thursday night.
Egyptians everywhere have taken to streets to express their joy at this
unexpected victory.
Ghana 1-0 Nigeria
Asamoah Gyan scored the only goal to help a well-organised Ghana book their place in the Africa Cup of Nations final with a battling victory over regional rivals Nigeria.The only goal came midway through the first half when a Kwadwo Asamoah corner caught out the napping Super Eagles defence and the in-form Rennes striker applied the finishing touches.
It was one-way traffic thereafter as wasteful finishing from their opponents, coupled with some dogged defending and some especially solid goalkeeping from Wigan goalkeeper Richard Kingston, helped the four-time former winners seal a place in the final for the first time since 1992.
Nigeria were guilty of some poor finishing with Obafemi Martins, starting for the first time in the competition, one of the main culprits.
He almost handed his side the perfect start after playing a neat one-two with Peter Odemwingie on the left, but defender Hans Sarpei did just enough to put the Wolfsburg striker off his stride.
After the fast start, the pace then slowed as the Black Stars struggled to force their way into the game against their more experienced opponents.
However, they stunned the Super Eagles into silence in the 21st minute with a goal that came completely against the run of play - Gyan's run to the near post catching the defenders off guard as he met Asamoah's corner with a powerful headed finish.
The Rennes striker almost doubled the advantage shortly after with a cleverly attempted 20-yard lob that flew inches over Vincent Enyeama's goal.
Just before the half-hour mark Martins had the best opening for his side when Odemwingie's shot from outside the box deflected into his path, but the final 12-yard shot was too close to goalkeeper Kingston, who did excellently to push the ball wide.
The Lokomotiv Moscow forward should then have done better after finding himself with a free six-yard header created by Uwa Echiejile's pin-point pass from the left, which was nodded wide.
And Odemwingie was guilty of another wasted chance on the stroke of half time when the ball came to him inside the box, but was mis-hit woefully off target.
It remained 1-0 to Ghana at the break and the Nigerians continued to pile on the pressure after the restart.
And Shaibu Amodu's men were almost gifted an instant way back in when Odemwingie's attempted pass was almost deflected into his own goal by Lee Addy, but for the intervention of Kingston.
They continued to press but failed to make the most of half-chances with Chinedu Obasi and John Obi Mikel both coming close through half-chances, before Martins missed another excellent chance - he was played into the box by a splendidly weighted pass from his Chelsea team-mate, only for Kingston's right hand this time to come to the rescue.
With 20 minutes to go, Amodu decided to throw in Yakubu Aiyegbeni, who had an instant chance to score when he was put in six-yards out by another substitute Victor Obinna - the ball, though, which came quickly was skied into the crowd.
Martins again found himself in on goal seconds later, but for third time in the game the real chance went before it actually came.
With 10 minutes to go, the anxiety began to show amongst the Nigerians as Ghana looked happy to sit back on their one-goal lead.
They tried desperately to draw level, but it was not to be - the best chance of the closing stages coming when Sani Kaita fired wide - as Ghana claimed the bragging rights from west Africa.