Davydenko’s 7-6 (7/4), 4-6, 6-3 win over the Swede means he finishes second in the group and will face Roger Federer in Saturday’s opening semi-final, while 25-year-old Söderling takes on US Open champion Juan Martin Del Potro in the other semi.
The Russian earned his first break point in the seventh game but Söderling closed the door on that opportunity with a powerful serve.
Söderling, who had won six of their previous nine meetings, failed to convert two break points of his own in the next game and the set went to a tie-break.
At 4-4 in the breaker, Soderling tamely netted to hand Davydenko the chance he had been waiting for. He needed to win both service points for the set and did just that, finishing the job with an emphatic smash.
Söderling had to save a break point at 2-3 in the second set and had another scare when falling awkwardly while hitting a forehand two games later.
He showed no signs of any damage, however, as he broke Davydenko to love for a 5-4 lead before serving out the set.
Davydenko refused to be discouraged by that setback and broke for a 4-2 lead in the deciding set.
That was enough to end Söderling’s resistance as Davydenko held serve twice to go through.
Söderling is the first Swede to reach the semi-finals of the event since Jonas Björkman in 1997 and he is set to rise to eighth in the world as a result of his performance.
He is only competing in this season finale because of an injury to Andy Roddick, but his victories over Djokovic and Rafael Nadal had made clear his determination to take advantage of his good fortune.
“It’s a great feeling (to be in the last four),” he said. “It gives me a lot of confidence beating Nadal and Djokovic. I lost in a close match to Davydenko, which with a little bit of luck I could have won.
“It’s going to be a tough match against Del Potro that’s for sure. He serves big. He’s hitting his forehand very well and plays fast. For sure I have to play better than against Davydenko.”