Barty, ranked nineteenth, cruised past Barbora Strycova 6-3, 6-2, while 25th-ranked Gavrilova had direct passage to the last four when Spain's Wimbledon champion Garbine Muguruza withdrew after her win over Kiki Bertens with a thigh injury.
Germany's Angelique Kerber won a seventh straight match as she steamed into the semifinals of the Sydney International on Thursday boosting her confidence for next week's Australian Open.
Barty, who'd been looking to become the first Australian woman to win in Sydney since Alicia Molik in 2005, could convert only one of seven break points, while racking up 38 unforced errors to Kerber's 13.
Barty held just once in the first set but reversed the momentum in the second when she broke in the ninth game after Gavrilova double faulted twice, which prompted the 23-year-old to smash her racquet in frustration and earn a code violation.
BC-TEN-Sydney International, 188 Angelique Kerber wins 8th match in a row, into Sydney finalAP Photo XRR129, XRR105, XRR103, XRR128Eds: With AP Photos.
Italian Camila Giorgi continued her impressive run at the Sydney International by racing past Agnieszka Radwanska 6-1 6-2.
In the men's final, Daniil Medvedev beat Alex de Minaur 1-6, 6-4, 7-5.
She also beat the new Australian No.1 at 2017 Strasbourg quarterfinal before losing to Stosur in the final.
Standing between the Belgian and the retention of the title is Mihaela Buzarnescu, the Romanian reaching the final with a 6-2 6-2 defeat of Lesia Tsurenko. The loss was "frustrating", Watson said. I'm trying to play my game again, enjoy every minute on court.
"I feel like I can fly under the radar a little bit more maybe than other years, but when you are playing well and have that better number next to your name, that is obviously a great thing".
Former champions Juan Martin del Potro and Roberto Bautista Agut will meet Saturday in the final of the ATP Tour's ASB Classic in Auckland, New Zealand. Defending champion Mertens suffered a second-set blip against Watson, victor in 2015, but recovered to earn a 6-4 1-6 6-2 success.