The 30-year-old southpaw fired eight aces, including five in the decisive third set, as he bested Stepanek 6-4, 3-6, 6-3 in just over two hours on the indoor hardcourts at The Racquet Club of Memphis.
It was the second win over a seeded opponent in as many days for Melzer, who also defeated top-seeded American John Isner in Friday's quarterfinals. He entered the tournament unseeded.
Melzer will vie for the title against either fourth-seeded Canadian Milos Ranoic or German Benjamin Becker in Sunday's final. Those two face off in the other semifinal later Saturday.
The 2012 Memphis champ will pocket $277,915.