Sunday's meeting will be the first time that the same duo will compete for the gilded Challenge Cup in back-to-back years since the Serbian and his great rival Roger Federer faced off in 2014 and 2015.
"I've said it many times, Wimbledon has been a childhood dream for me to play and to win... I was a seven-year-old boy watching bombs fly over my head and dreaming of being on the most important court in the world," Djokovic told the Centre Court crowd.
"I was constructing Wimbledon trophies out of any material in the room. It has been an incredible journey. I try not to take it for granted every time I find myself on this unique court.
"Obviously during the match it's business time and... I try outplay my opponent. I'm satisfied and pleased, but I don't want to stop here. Hopefully I get my hands on the trophy."
With Centre Court still filling up following Alcaraz's 6-7(1), 6-3, 6-4, 6-4 victory over fifth seed Daniil Medvedev a short while earlier, second seed Djokovic broke after a breathtaking 26-shot rally in the sixth game of the opening set.
Djokovic had angrily lashed out at Centre Court fans after a fourth-round win over Holger Rune on Monday but he raised his arms and demanded more from the crowd, drawing some boos from them.
Fans got behind Musetti, who was spurred into action as he broke back to make it 4-5 with a fiery forehand but he gifted the set to his opponent after a shaky service game.
Musetti quickly made amends and inroads in the second set, producing a stunning backhand pass for a 3-1 lead, but Djokovic was unperturbed as he clawed his way back and raised his level significantly at the end to clinch the tiebreak.
With a sixth straight All England Club final and his first of an unusually patchy season within sight, the 24-time Grand Slam champion pounced for a break in the opening game of the third set with a backhand crosscourt winner.
Djokovic mixed up his game by serving and volleying to leave Musetti on the ropes, before staving off a late comeback attempt from the Italian to save a break point and prevail on his fourth match point when the Italian sent a shot long.
He celebrated the win with his now-familiar act of imitating playing the violin with his racket, a nod to his daughter in the stands who is learning to play the instrument, but he drew more boos from the fans.
Djokovic will not mind being the pantomime villain if he can claim a men's record-equalling eighth Wimbledon trophy, especially since his participation had been in doubt after he had to undergo knee surgery just five weeks ago.
"I came to London eight days before the tournament started. I didn't know (if I would play). I was keeping everything open until the day of the draw," Djokovic said.
"I played a couple of practice sets with top players and that proved to me I was in good enough state to not just be in Wimbledon, but to go deep into the tournament.
"That kind of mentality is there and is ever-present. Thanks to the team members for helping me."
Musetti, who had dragged Djokovic to five sets in the latest ever finish at Roland Garros last month, was left to rue another defeat and another lost opportunity to pull off a major upset.
"This was the seventh time that we were playing against each other and I've never faced a Nole like this," Musetti said.
"I was really impressed... I think his tennis really fits well on this surface. Especially how he returns. I have to say today was really a joke at the end how he was returning.
"Also in important points he was playing, especially in the second set, like at the end, I had chances to break him, but he was serving really well. He deserved to win."
