The 29-year-old needed three hours 42 minutes to triumph 7-5 4-6 7-6 (7-2) on Saturday (AEDT) and is now one step closer to a first ATP Tour title.
It was Thompson's fourth Top-10 win and his second against Zverev, whom he also beat last October in Tokyo.
"I think it's just a miracle," Thompson said of his Mexican run, which included a fightback from 6-0 3-0 down in the quarter-final against American teenager Alex Michelsen.
"I never thought I'd be here."
3 hours in a still pulling out top shelf!— ATP Tour (@atptour) @CaboTennisOpen | #LosCabosTennisOpen pic.twitter.com/bVG8GHp6U0February 24, 2024
Thompson, striving for his third tour-level final, dropped his serve twice in the opening set, but broke three times to take it in 76 minutes.
His German opponent got the only break of the second set in the fifth game to push it to a decider, where both were unbreakable, forcing it to a tiebreak.
Thompson raced out to a 6-1 lead in the breaker before clinching it 7-2.
"It was over three and a half hours. It was just a great match and I just competed until the end I really don't know what to say. I'm pretty tired," Thompson added.
The eighth-seeded Sydneysider entered the event ranked a career-high No.40 in the world, and is set to rise another four spots. He could finish as high as No.32 if he wins the decider.
3�⃣ hours and 4�⃣0�⃣ minutes 🤯— ATP Tour (@atptour) @jordanthommmo2 comes past top seed Zverev 7-5 4-6 7-6(2) to reach the final in Cabo!@CaboTennisOpen | #LosCabosTennisOpen pic.twitter.com/6Z7aicxtAeFebruary 24, 2024
Thompson will face Casper Ruud in the final after the Norwegian defeated defending champion Stefanos Tsitsipas 6-4 7-6 (7-4) in the earlier semi.
The fourth-seeded Ruud fought off five set points in the second set to advance to his 19th tour-level final (10-8).
Greek star Tsitsipas, who was bidding to successfully defend a title for the third time (Marseille 2019-20, Monte Carlo 2022-23), has now lost six consecutive matches against Top 20 opposition.
"It was a really close match, all in all, especially the second set," Ruud said.
"I was fortunate to save a few set points there and hold him off. I was just a bit lucky, and in the tiebreak I played really well from the beginning, so I'm very happy with the win."
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