Cesc Fabregas scored the winning penalty to send Spain through to a third successive major tournament final after defeating Portugal in Donetsk.
After a tightly contested 120 minutes between the Iberian rivals, Spain prevailed in a nail biting shoot-out, which saw Cristiano Ronaldo overlooked as one of Portugal's penalty takers, as Bruno Alves struck the bar.
With Andres Iniesta, Gerard Pique and Sergio Ramos having successfully converted, substitute Fabregas was left to secure Spain's passage, as they became the first nation since West Germany in 1976 to reach three major finals in a row.
The holders will now face either Germany or Italy in Sunday's final in Kiev, but know they will have to sufficiently improve their performance, after being frustrated by Portugal for long periods in Ukraine's capital.
Vicente Del Bosque began with a striker in Alvaro Negrdo, instead of Fabregas, while Hugo Almeida was trusted with leading the Portuguese line alongside Ronaldo, with whom much was expected yet again.
Paulo Bento's side had combined resilience in defence with a clinical edge in the final third during their Euro 2012 campaign, and from the outset in Donetsk Spain were frustrated by the high pressed Portuguese, as the reigning world and European champions' passing game was disrupted.
As ever, Portugal's threat came from Ronaldo, as did their only genuine opportunities of the opening 45 minutes; shooting over when well placed before firing wide after Spain were guilty of some sloppy passing at the back.
It was quickly becoming one of Spain's most uncharacteristic performances, with long-balls and direct passing being preferred to the patient build-up that has underpinned their dominance during the past four years.
The second half brought similar frustration for the Spanish, who quickly reverted to type and introduced Fabregas and Jesus Navas, for Negredo and David Silva, a thus removing the focal point of their attack.
While Navas began by raiding on the right hand side, against the formidable Fabio Coentrao, the removal of Negredo allowed Xavi and Iniesta more influence in the final third, and the space did allow the former to break free, but shot straight at Rui Patricio.
The free flowing first half had overal been replaced by a disjointed second period, which saw both sides cancel each other out, than make strides towards driving a stake through their opponents' European Championship challenge.
Ronaldo was presented with three opportunities from set pieces, all of which failed to find the target, before a chance in the 90th minute, following a Portuguese counter-attack, but the Real Madrid forward blasted over.
It worked as the final the opening of normal time, as the first semi-final drifted into extra time, which saw Iniesta squander the best chance in the opening half, as Patricio turned away his cushioned volley after Jordi Alba's cross.
At mid-way point in extra time, the Spanish began to emerge as the stronger force, with Alvaro Arbeloa also able to get forward, and the former Liverpool defender found substitute Jesus Navas free in the penalty area, but Patricio was equal to his low effort.
Neither side could produce the killer blow in extra time, leading to a second consecutive penalty shoot-out of the tournament.
After Xabi Alonso and Joao Moutinho were denied by Patricio and Iker Casillas, Iniesta, Pique, Sergio Ramos; Pepe and Nani were successful before Alves hit the bar, allowing Fabregas to convert the winning spot kick to send Spain through to their third successive major final, and leave Ronaldo and co utterly frustrated.