The 22-year-old world number four was leading 21-12 12-7 against Wang Yihan on Saturday when her Chinese opponent limped off the court at Odense.
Pitted against the woman who had thrashed her 21-13 21-13 in the Olympic semi-finals in London, Nehwal proved too strong for Wang, who was clearly hampered by the damaged knee.
"It was an exciting victory. I played at full strength today and got the result," Nehwal told the Times of India newspaper.
Coach Pullela Gopichand said the result was a massive confidence boost for Nehwal ahead of her future battles against the Chinese contingent, who make up four of the world's top-five players.
"A victory is a victory. These sorts of injuries are common but Saina has been playing well," Gopichand, a former All-England Champion, told the newspaper.
"At the Olympics, Saina was very aggressive but here she was in total control," he added.
Nehwal has established herself the face of Indian badminton since winning the Indonesian Open in 2009 and became the first shuttler from her country to win an Olympic medal when she returned with a bronze from this summer's London Games.
Her efforts were rewarded last month when Nehwal signed a three-year deal with a sports management company that according to media reports, made her the highest paid Indian sportsperson outside of cricket.
Nehwal will be favourite to win Sunday's final against world number seven Juliane Schenk of Germany who downed Jiang Yanjiao 13-21 21-14 21-15 to book a place in a rare Super Series Premier final without a player from China.
Schenk had pulled off a massive upset on Friday when she overcame world number two and Olympic champion Li Xuerui.