Abby Dow's breathtaking length-of-the-field breakaway try 10 minutes into the second half was decisive.
Less than seven months after breaking her right leg playing for England against Wales, Dow capped a move that started behind her own try line to break Canada's resistance and send the tournament favourites to a record-extending 30th consecutive win.
With England 18-12 to the good, the Canadians had been camped on their opponent's line, with several players going close to nabbing a crucial score.
After mounting pressure, England forced a turnover and set in motion a flowing move that ended with Dow racing from near halfway to touch down a memorable matchwinner.
"It was incredible," England captain Sarah Hunter said.
"Canada really tested us, for rugby fans I hope that was an advertisement for what women's rugby is all about.
"Canada were relentless and the girls put their bodies on the line."
Hosts New Zealand take on France later on Saturday as they look to retain the title they won in Ireland in 2017.
England, who last won the title in 2014 when they defeated the Canadians in France, will be appearing in the final for the sixth tournament in a row and eighth time in total.
"I am proud of the girls," Canada head coach Kevin Rouet said of his side, who now look forward to the third-place play-off.
"It's about details and England were better than us on details.
"There are more than a few missed opportunities for us. We'll be back."
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