It was the fourth time Djokovic had beaten Federer at the semi-final stage in Melbourne after doing the same in 2008, 2011 and 2016.
Serbia's Djokovic, 32, was 4-1 and 40-0 down in the opening set before recovering to win the tie-break.
Federer sustained a groin injury earlier in the tournament but fronted up regardless, limping through a 7-6 (7/1), 6-4, 6-3 loss.
So why hasn't Federer managed to win a Grand Slam match against Djokovic in eight years?
"I didn't have any pain in the daily stuff which was a positive sign - so I felt I was always going to make it. We saw I was still able to make a match out of it". I walk across the court because they are not allowed to speak to the players.
He was seen around Melbourne Park before the match with tape on his upper right leg and there were even rumours that he might pull out.
"I do believe that", he said. If it did, this would have been my first retirement today. You know, got to go for it.
The Swiss tennis star lost the match in straight sets despite a strong start to the first set.
A six-time champion in Melbourne, Federer, 38, was unsurprisingly unwilling to guarantee he would be back at the Australian Open, but he was hopeful. "I wouldn't have gone on court if I thought I had no chance to win", said Federer, who had a scan on the problem on Tuesday night.
"I was playing with nothing to lose and taking big cuts at the ball and keeping rallies to a minimum, trying to catch him off guard and mix it up", Federer said. "I'm doing an interview thing, I can return his serve, how I will return it". I'm sure maybe he was feeling a little bit uncomfortable in the beginning, but he was able to find a way there.
"No, look, at the end of the day I'm very happy".
"It was the maximum to go to get at this tournament, especially after the (John) Millman and the Sandgren match".
"It was disgusting, to go through what I did". Nice entrance, nice sendoff, and in between is one to forget because you know you have a 3% chance to win.
After limping out of the Australian Open with his 39th birthday fast approaching, Roger Federer is not done with chasing grand slams.
"You never know what the future holds particularly at my age", he said.