Wozniacki, 26, took a medical timeout early in a second set and looked in trouble at a break down in the third but rallied to progress 6-2 3-6 7-5.
Former world number one Wozniacki raced into a one-set lead in just 33 minutes and was a break up in the second before the Dane began to struggle with an abdominal injury.
Watson took full advantage to secure a double break with some masterful hitting that sent their semi-final to a deciding set.
The pair exchanged breaks of serve early in the third but Wozniacki secured the decisive break as the Brit served to stay in the match.
Wozniacki will face Pliskova in the final after her semi-final opponent Johanna Konta withdrew injured.
3-Karolina Pliskova (Czech Republic) beat 5-Johanna Konta (Britain) walkover
6- Caroline Wozniacki (Denmark) beat Heather Watson (Britain) 6-2 3-6 7-5
photo Cheltenham jockey club
photo Cheltenham Racecourse