Top-seeded Li defeated Germany's Annika Beck 6-1, 6-3, while fifth-seeded Peng advanced in a walkover when American Vania King withdrew with a right thigh injury.
"It'll be a tough match tomorrow," Li said. "We're quite familiar with each other and have improved a lot over the last year. But no matter what, I'm quite looking forward to the final."
Li was leading 6-1, 5-0 Friday when Beck came back to reel off three straight games, but the former French Open champion regrouped to close out the match.
King said she began feeling pain in her leg during her win over second-seeded Sara Errani in the second round and pulled out to rest before the Australian Open, which begins on Jan. 13.
"It was a really difficult decision for me to pull out because I hate losing and not competing," King said. "But I just have to look out for my health."
Saturday's final will be just the second in WTA history featuring two Chinese players. Li lost the first when she retired against Zheng Jie at Oeiras in 2006.
Li has a 5-1 record against Peng, including a 4-0 mark at tournaments in China.