The world number four, who has a realistic chance of robbing Roger Federer of third spot before the season is out, finally prevailed in a second-set see-saw of breaks to win 6-4 7-5 in an hour and 40 minutes.
Focused: Andy Murray on his way to victory over David Nalbandian
The Scot will now meet Spain`s David Ferrer in the last four as he bids to win back-to-back tournaments following his success in Thailand.
It was his 10th success in a row and he has lost just once in 22 matches and demonstrated just why here as he saw off the former world number three.
After an even start which saw serve held for the first four games, Murray broke thanks largely to a lob and volley combination, setting up a break point that Nalbandian validated with a double fault.
Hair-raising experience: David Nalbandian struggles to contain an in-form Murray
He cemented the break to love and then forced Nalbandian to hit long and wide to see out the first set.
The second started in a similar fashion, with serve prevailing until the seventh game when Nalbandian netted as he attempted to save three break points, only to rob Murray`s serve off him in the next game.
Some aggressive baseline hitting helped Murray make it three breaks in a row and set up a chance to serve for the match, but a loss of concentration allowed the Argentine to continue a remarkable run of games and break back to 5-5.
Four straight games became five as Nalbandian hit a forehand long, and Murray did not miss a third chance to see out the match, serving out for the win.
Victory salute: Murray celebrates another impressive victory