Spain, who beat Serbia comfortably last year to capture their first European championship, will start as favorites again after coasting to an 80-72 victory over Greece, the team they beat in the 2006 world final.
Serbia's young team, though, will be brimming with confidence after a dramatic 73-72 triumph over Balkan neighbors Croatia took them into the last eight in only their third major tournament as an independent nation.
Captain Nenad Krstic scored 16 points and guard Aleksandar Rasic added 15 with three assists to lead Serbia to an emotional victory in an enthralling rollercoaster game where the lead changed hands 13 times.
Dropped for last year's European championship, Rasic was the architect of his team's win with cool shooting from the foul line in a heart-stopping last minute after counterpart Marko Popovic missed an important free throw at the other end.
"I know people back home are sick and tired of our narrow defeats in big games but we left everything on the court and all I can say is I am sad we didn't win," a dejected Popovic told Croatian television after recording a game-high 21 points.
Krstic, who suffered a career-threatening knee injury in 2006, said Serbia would not rest on their laurels.
"We have to forget this match as soon as possible and focus on the next one which is going to be even more difficult," he said.
"But we have nothing to lose because what we have already achieved is tremendous. It would have been very painful to lose to Croatia and watching the last-minute drama on the bench was sheer anguish."
Both teams played exceptional basketball, ranging from exquisite set plays to slam dunks and lethal three-point shooting, before Spain took control in the fourth quarter and Greece ran out of steam.
The Greeks led 54-52 early in the final period but there was no way back for them after an 18-6 run, spurred by brilliant long-range shooting from guards Juan Carlos Navarro and Rudy Fernandez, gave Spain a 70-60 advantage with two minutes left.
Navarro led the winners with 22 points, shooting seven of 10 from the field and five of five from the foul line. Fernandez chipped in with 14 while Nikolaos Zisis and Dimitrios Diamantidis grabbed 16 points each for Greece.
"We had some difficult moments in the tournament but we have now made our presence felt and we played with a lot of intelligence this evening," said Navarro.
"The team is focused and committed and that's the path we have to follow because we are going for the main prize," added Navarro.
(Reporting by Zoran Milosavljevic in Belgrade, additional reporting by Iain Rogers in Madrid, editing by Tony Jimenez)