The Spaniard will face 2015 Roland Garros champion Stan Wawrinka for the title after the 32-year-old Swiss defeated Andy Murray in a five-set epic to become the oldest finalist in Paris since 1973.
Nadal, who won the last of his French Opens in 2014, is bidding to become the first man to win 10 titles at a single Grand Slam.
He leads the head-to-head with Wawrinka 15-3, but the Swiss stunned an injury-hit Nadal three years ago to claim the Australian Open crown.
"I have been playing a great event. But Stan is playing unbelievable," said Nadal.
"It will be a super hard final and I will need to play at my very best."
Thiem broke Nadal in the opening game, but the Spaniard swiftly countered with four games to subdue the Austrian pretender and run away with the first set.
Nadal erased two more break points early in the second set as Thiem again threatened, but the sixth seed promptly lost his own serve to hand his opponent the initiative once more.
With Nadal locked in, the Spaniard calmly converted the first of three set points with a confident volley to leave Thiem staring into the abyss.
The 14-time major champion was in total control after Thiem meekly surrendered serve to start the third set, Nadal responding with a routine hold for a 2-0 cushion.
Thiem's hopes of becoming just the second Austrian - after 1995 French Open winner Thomas Muster - to reach a Slam final subsided with a whimper as Nadal raced to victory in just over two hours.